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US shares end lower on GM, Snap and airline sags and geopolitical risks

Last updated: 08:19 07 Mar 2017 AEDT, First published: 20:00 06 Mar 2017 AEDT

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US stocks ended lower on Monday, never once managing to enter positive space, as a March rate hike was fully priced in, investors fretted over the small print of GM’s exit from Europe, and Snap shares ended below their $24 price at which they had debuted last week.

Geopolitical risks also made investors wary, starting with North Korea’s firing of missiles into the Sea of Japan, yet more intrigue in the French presidential campaign, and ending with US President Donald Trump delivering a revised version of a controversial travel ban.

The S&P 500 market bellwether ended down 0.3% at 2375, the Dow Jones Industrial Average 0.2% lower at 20,954, and the tech-heavy Nasdaq Composite down 0.4% at 5849.

Shares in Snap Inc (NYSE:SNAP), the owner of vanishing message app Snapchat, closed down a heavy 12.3% at $23.77. On Thursday, they had debuted at $24.

After two days of gains, Snap shares were in retreat most of the day on Monday, after none of seven Street analysts tracking the stock offered it a Buy recommendation.

Read: Snap shares break two-day rally

Despite the decline, the shares were still trading at nearly 40% higher than the $17 a share the IPO was priced at on Wednesday night.

Airline stocks dropped on Monday after Delta Air Lines (NYSE:DAL) unexpectedly cut its guidance on a number of key metrics amid rising fuel prices and labour costs.

The US’s largest carrier by market value said it expected passenger revenue per available seat mile (PRASM) – a closely followed industry measure of pricing power – will be flat for the current quarter, which ends in March.

The biggest faller among airlines was United Continental Holdings (NYSE:UAL) down 3.2% to $73.14, alongside American Airlines (NASDAQ:AAL) down 3.2% at $45.31, Delta Airlines down 2.6% to $48.85, Alaska Air Group (NYSE:ALK) down 2.3% to $96.63.

Although it pared losses, General Motors Company (NYSE:GM) shares ended 0.8% lower at $37.91 after investors exited the issue after the much-anticipated sale of its Opel/Vauxhall subsidiary to PSA Group was officially announced.

Meanwhile, the S&P Midcap 400 ended down 0.6% at 1728 and led by Akorn Inc (NASDAQ:AKRX) down 7.1% at $22.39 and the S&P Smallcap 600 down 0.7% at 843 and led by Donnelley [R.R.] & Sons Co. (NYSE:RRD) down 12.2% to $15.40. 


Early trading

US stocks were lower on Monday while the dollar strengthened, as geopolitical fears and a looming interest-rate rise by the Federal Reserve curbed investors’ risk appetite.

The S&P 500 was down as much 0.6% to 2,368 before trimming its losses to trade 0.4% lower. Meanwhile, the Dow Jones Industrial Average fell 0.3% to 20,947, while the Nasdaq Composite slid 0.5% to 5,840.00.

The prospect of higher rates also helped lift the US dollar, with the dollar index — a gauge of the greenback against a basket of peers — rising 0.2%.

After all the underpinning of the past two weeks – on hoped-for market deregulation as well as a hoped-for US interest rate hike in March – financials led the downside on Monday, with the S&P Financials sector losing 1%.

With the Federal funds rate now estimating a 98% chance of a rate hike on March 15, it was no longer a fact worth chasing in the eyes of investors.

Higher rates are a positive for banks’ net interest margins — the difference in the rates they charge on loans and their own funding costs.

US jobs data this Friday could still be the insurance policy the markets need. The US jobs report on Friday, if it bears out strong jobs growth and, more notably, a possible uptick in wages could cement the odds for a Fed move this month.

Among the top fallers on the S&P 500 were Endo International (NASDAQ:ENDP) and retailer Kohl’s Corp.

Healthcare group Endo was down 6.3% to $11.47, extending losses from Friday.

Kohl’s was down 3.9% to $39.20 after a negative report on traditional retailers from Moody’s ratings agency earlier.

The S&P Midcap 400 was down 0.7% at 1727 and led by generic drugs group Akorn Inc (NASDAQ:AKRX) down 7.7% to $22.26 after being listed as a sell stock by Zacks Equity Research.

The S&P Smallcap 600 was down 0.7% to 843 and led by Donnelley [R.R.] & Sons Co. (NYSE:RRD), down 10.1% to $15.76.


Pre-Open

US stocks are set to open lower on Monday and if futures trading is any guide, fresh record highs will prove elusive this session.

That said, there were two instances last week when markets opened the other way to pre-market futures trades. So watch this space as ever.

The S&P 500 market bellwether is seen opening down 0.4%, while the Nasdaq Composite, and the Dow Jones Industrial Average are seen falling by 0.3%. In the case of the Dow that means back below the 21,000 new milestone it marked last week.

US markets closed flat on Friday after Fed chair Janet Yellen signaled that an interest rate hike would likely come when Fed leaders meet next week.

While financials should remain underpinned by that near certainty on US interest rates, the real focus on Monday could turn to the traditional retail sector, which is in a precarious state, according to ratings agency Moody’s.

The number of distressed US retailers has trebled since the Great Recession of 2007 and now stands at the highest level since the end of the downturn, according to a recent Moody's Investors Service report.

Online competition from the likes of Amazon (NASDAQ:AMZN), what the report calls "erratic management" and limited financial flexibility are to blame, Moody's said.

The 19 retail and clothing companies on the distressed list include Sears Holdings (NYSE:SHLD), J. Crew, Payless, Claire's, Rue21 and True Religion. Even huge established names like Macy's (NYSE:M) are not out of risk.

Recent weeks have provided new evidence of the struggles of traditional retail. Sears stock recently plunged to an all-time low, JC Penney (NYSE:JCP) announced plans to shutter up to 140 stores, and Target (NYSE:TGT) shocked Wall Street with terrible holiday sales.

Amazon shares were down 0.3% at $847.05 pre-market and in line with the wider market. Penney fared better, down only 0.2% at $6.25 pre-market.

Meanwhile, car making behemoth General Motors (NYSE:GM) reached a deal to exit Europe at the weekend.

It is to sell its money-losing European operations to the French maker of Peugeot and Citroen cars PSA. The combined value of the deals is about $2.3bn.

But GM shares were 1.1% lower at $37.81 pre-market.

Another watch is German lender Deutsche Bank (NYSE:DB) which is asking investors for $8.5bn to help improve its financial health after two years of heavy losses. Deutsche shares were an underperformer to the tune of down 1.7% at $19.03 pre-market.

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