Wall Street is likely to see some selling at the start of trading on Wednesday, as investors use disappointing data about the manufacturing sector as an excuse for profit taking.
Two key economic reports were released before the opening bell. One showed that inflation remained in check - a good sign for the Federal Reserve's efforts to stimulate the economy. However, a key regional manufacturing survey showed contraction in May, a hint that the recovery might not be as robust as many had hoped.
The disappointing news on the factory sector comes as stocks have steadily advanced over the past month. The major averages continued their upswing yesterday, with the Dow and S&P 500 once again setting new record closing highs.
Producer prices dropped 0.7 percent in April, spurred lower by a slide in energy prices. This according to figures released Wednesday by the U.S. Department of Labor. Core prices, which exclude the volatile food and energy sector, edged up by a modest 0.1 percent.
Economists had expected the headline number to drop by 0.7 percent. Core prices were projected to rise by 0.2 percent.
Producer prices provide a key measure of wholesale inflation. On Thursday, the government will announce figures on consumer prices, giving a look at changes in retail inflation.
The New York Federal Reserve said its Empire State Manufacturing Index came in at a negative 1.4 for May. This was down from a positive 3.1 in the previous month.
Economists had expected the index to rise to a reading of positive 3.75.
The Empire State Index measures manufacturing activity in New York State. Any reading below zero indicates contraction. The survey is considered a key regional factory survey, providing an important look at the health of the manufacturing sector.
In corporate news, Deere & Co. (DE) has revealed its quarterly report. The farm machinery maker beat expectations with its second-quarter earnings, with profits rising 3 percent on higher sales. However, the company trimmed its annual sales growth outlook due in part to a cold snap in the U.S., which has delayed planting.
Meanwhile, Agilent revealed a quarterly profit that fell 35 percent from last year. Revenue remained flat as costs at the scientific instruments maker rose. Still, the bottom line came in ahead of analysts' estimate and the company increased the amount approved under its stock buyback plan.
Wal-Mart is also in the news. The world's biggest retailer says it will conduct in-depth safety inspections at all factories in Bangladesh that produce goods for the company. Wal-Mart is initiating its own plan rather than joining a pact signed by a group of European retailers.
The increased scrutiny of facilities in the south Asian country follows last month's collapse of a factory building that left more than 1,000 workers dead.
For comments and feedback: editorial@rttnews.com