Stocks surrendered early gains on Tuesday, sending major North American indexes lower as the longest losing streak of the year continues amid ongoing uncertainty over Europe’s sovereign-debt crisis.
The Dow Jones industrial average closed at 12,632.00, down 63.35 points or 0.5 per cent. The broader S&P 500 closed at 1330.66, down 7.69 points or 0.6 per cent – marking a 14-point reversal from its high earlier in the day. In Canada, the S&P/TSX composite index closed at 11,343.05, down 145.48 points or 1.3 per cent. It was the TSX’s ninth decline in the past 10 trading sessions.
The day had begun looking promising. A preliminary reading on European gross domestic product in the first quarter was unchanged, versus expectations for a 0.2 per cent contraction – building the impression that the region’s economy might not be in such bad shape.
In the United States, retail sales in April rose 0.1 per cent, which was in line with expectations. A reading on homebuilder confidence – while still relatively weak – rose to its highest level in five years in May, pointing to better new home sales ahead.
However, any optimism about the European debt crisis was shredded as the day progressed. Coalition talks in Greece broke down, forcing the need for another election – and ratcheting up the uncertainty over whether the country can move ahead with austerity measures and remain in the euro zone. Greece is also facing a financial crisis on another front: Greek depositors withdrew €700-million from local banks on Monday, posing a dangerous scenario for cash-strapped lenders.
In Canada, commodity prices continued to weigh on the benchmark index, as the Reuters/Jefferies CRB index slumped deeper into bear-market territory (defined as a drop of 20 per cent or more). Crude oil fell to $93.98 (U.S.) a barrel, down 80 cents. Gold fell to $1,557.10 an ounce, down $3.90. Among commodity producers, Suncor Energy Inc. fell 1.1 per cent and Barrick Gold Corp. fell 3.9 per cent, hitting a new 52-week low.
Among U.S. stocks, JPMorgan Chase & Co. rebounded slightly after declines on Friday and Monday, following disclosure from the bank that it had sustained a $2-billion trading loss. The shares rose 1.3 per cent.
However, Avon Products Inc. fell 10.7 per cent after Coty Inc. withdrew its $10.7-billion takeover offer for the cosmetics company. After markets closed, J.C. Penney Co. Inc. reported a quarterly loss of 75 cents a share and suspended its dividend. The shares fell 14 per cent in after hours trading.
Meanwhile, the upcoming initial public offering from Facebook Inc. is looking more and more interesting. Though the shares are expected to price between $34 and $38 – up from an earlier estimate of $28 to $35 – the Wall Street Journal reported on Tuesday afternoon that General Motors has decided to stop advertising on the social media network, arguing that its paid ads had little impact on consumers.