U.S. stocks and exchange traded funds (ETFs) fluctuate in morning trading on good news from the consumer staples sector, weak performance from the technology industry and an overall belief that the economy is still struggling.
In an attempt to restore confidence in the financial system and a time of transparency, the federal government has announced that it is planning on releasing data on the health of the 19 largest banks. All 19 are expected to pass the stress tests, but some are expected to score higher than others.
When will this information be disclosed, those who know aren’t saying. Supporters of this decision believe that transparency is king and by releasing the data it will instill investor confidence in the markets. Opponents fear that the data will openly show which banks are still vulnerable and send the financial sector into a downward spiral, states David E Sanger and Eric Dash of The New York Times. There are some good banks out there, though.
More bad news has hit the financials as UBS (UBS) announced its plans to layoff an additional 7,500 employees, bringing staff reductions to about 20% of its workforce. This is an attempt to cut costs and soften the blow of a huge loss. As a result, the Financials Select SPDR (XLF), was down about 0.48% in intraday trading, despite being up 27.6% over the last month.
On a different note, the Labor Department reported that the consumer price index fell 0.4% in March, when compared to the index a year ago, and output at factories, mines and utilities dropped 1.5% as the share of industrial capacity in use dipped down to 69.3%.
These are all indicators of deflation or a prolonged price decline, states Shobhana Chandra and Courtney Schlisserman of Bloomberg. Some believe that overall prices have gone down because of declining food and fuel costs. In fact, most economists suggest that consumer prices will increase by about 0.1% as many companies are trying to entice consumers to buy.
On a sour note, chipmaker Intel (INTC) dropped 4.6% after releasing earnings reports indicating that a first quarter profit decline of 55%, despite beating Wall Street’s forecasts for earnings and revenues. Intel blames this decline on a sour economy and a decline in the demand for personal computers. This sent both the semiconductor and technology sectors down. Take a look at the Semiconductors ETF (SMH), which was down about 3.6% in morning trading, despite being up 14.3% year to date; INTC is 24.3%.
The iShares Dow Jones U.S. Technology (IYW) was down about 1.6% in intraday trading, despite being up about 12% year to date; INTC is 6.4%.
The Dow Jones Industrial Average was up about 0.5%, the S&P 500 was up about 0.1% and the Nasdaq was down about 1% in morning trading.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.