US stocks flat on economic data

US stocks traded flat at the open today, after data pointed to an economy that may have stalled while investors grapple with the euro zone's debt crisis.

A report by private payrolls processor ADP showed private employers created 133,000 jobs in May, fewer than the expected 148,000 while new claims for unemployment benefits rose by 10,000 for the fourth straight weekly increase. The data comes ahead of tomorrow's key payrolls report.

Commerce Department data showed economic growth in the United States was slightly slower than initially thought as gross domestic product was revised down to a 1.9 per cent annual rate from last month's 2.2 per cent estimate.

The Dow Jones industrial average dropped 6.28 points, or 0.05 per cent, to12,413.58. The Standard & Poor's 500 Index lost 0.34 points, or 0.03 per cent, to 1,312.98. The Nasdaq Composite Index shed 0.92 points, or 0.03 per cent, to 2,836.44.

"The markets have become less optimistic and much more accustomed to seeing numbers that are just not impressive," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

"It is clear the markets are pricing in a substantial slowdown moving forward in terms of GDP growth, employment gains, productivity gains - it's not encouraging for bulls."

The S&P 500 fell 1.4 per cent yesterday, its biggest decline since May 17th, as anxiety over the euro zone's fiscal crisis sent investors away from riskier assets and into safe havens such as US Treasury bonds. The CBOE volatility index, a gauge of market anxiety, jumped 14.8 per cent, its largest daily gain in almost three months.

European shares, which had steadied, turned negative after the US data. The FTSEurofirst 300 was off 0.1 per cent.

The European Central Bank increased pressure for a joint fund to guarantee bank deposits in the euro zone, saying the region needed new tools to fight bank runs as the region's debt crisis drives investors to flee risk.

The benchmark S&P index is on pace for its worst monthly decline since September on increasing concern over the euro zone's debt crisis and a spate of tepid domestic economic data.

US equities have been closely linked to the fortunes of the euro, with the 50-day correlation between the currency and the S&P 500 at 0.92. Expectations of an Irish vote in favour of Europe's fiscal pact helped the euro recover from a near two-year low against the dollar.

Reuters