Thursday, July 5, 2012

Markets drift lower on weaker economic data

Dow fell 36, decliners over advancers 3-2 & NAZ was up 1 from a rise of 9 at Apple (AAPL).  The Financial Index fell 2+ to the 196s. 

The MLP index fell 1+ to the 381s (after a pop of more than 20 in the last week) & the REIT index was down 1+ off its yearly highs to the 264s.  Junk bond funds were mixed to lower & Treasuries rose.  Crude dropped after the dollar rose against the € as ECB President Draghi said economic risks remain after the bank cut rates to a record low.  Gold fell as the dollar strengthened the most since Mar 9 after the ECB cut interest rates to a record low.  

AMJ (Alerian MLP Index tracking fund)

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CLQ12.NYM...Crude Oil Aug 12...87.15 ....Down 0.51  (0.6%)

GCN12.CMX...Gold Jul 12.......1,600.30 ...Down 21.00  (1.3%)

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  • Job seekers speak with with job recruiters while they attend the Coast to Coast job fair in New York, May 7, 2012. REUTERS/Eduardo Munoz
Photo:   Yahoo

Claims for unemployment insurance payments last week were below forecast, easing concern that the labor market was deteriorating.  Applications for benefits decreased 14K last week to 374K, the fewest since mid May, according to the Labor Dept.  The forecast was for 385K claims.  While auto-plant shutdowns to retool for the new model year often play havoc with the claims data around this time of year, there was no indication that influenced last week’s claims.  The Labor Dept projected a 3% increase in un- adjusted claims last week (about 11.3K).  Instead, there was a 0.8% decrease.  The agency projects an almost 30% jump this week as a result of the shutdowns.  The 4-week moving average fell to 385K last week from 387K.  The number continuing to collect jobless benefits climbed 4K to 3.31M.  The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.  Those who’ve used up their traditional benefits & are now collecting emergency & extended payments decreased by about 29K to 2.68M.

Fewer Americans Than Forecast File Unemployment Claims

ECB Cuts Benchmark Rate to Record Low of 0.75%, Deposit to Zero

Photo:   Bloomberg

The ECB cut its key interest rate by a quarter percentage point to a record low of 0.75%.  The move followed a rate cut by China's central bank & new stimulus measures by the Bank of England.  The ECB cut in the refinancing rate is aimed at giving a further boost to the sagging European economy after a summit last week where leaders agreed on new steps to strengthen the € currency.  The refinancing rate cut could mean lower borrowing costs for banks, businesses and consumers.  But some say it may have only a symbolic effect, since rates are already very low.  Lending activity remains weak because there's little demand from businesses for credit.  The ECB also cut its overnight deposit rate, what it charges banks for depositing their money with the ECB overnight, to zero which is meant to encourage banks to invest their money in the economy rather than stash it with the ECB.

ECB Cuts Main Rate to Record Low, Deposit Rate to Zero

US service companies grew in Jun at the slowest pace in nearly 2½ years, a troubling sign for the economy.  But those same firms boosted hiring last month, adding to other data that show job growth may have picked up.  The Institute for Supply Management said that its index of non-manufacturing activity fell to 52.1 last month from a May reading of 53.7.  The reading was the lowest since Jan 2010.  Still, any reading above 50 indicates expansion.  The sector had grown now for 30 straight months.  But a measure of employment showed that service firms added more workers last month as the employment index rose to 52.3, up from 50.8 in May.  A separate survey by the ISM said manufacturing shrank in Jun for the first time since Jul 2009, which was one month after the recession ended.  Production & exports declined, & the number of new orders plunged in Jun.

ISM Services Index in U.S. Fell to 52.1 in June From 53.7

The ECB rate cut & better data on jobless claims should have brought more buyers into the markets.  But retail sales in Jun are coming in soggy & other data is not inspiring.  Even MLPs which had been red hot for a week have cooled off.  The looming jobs for Jun coming tomorrow is making investors nervous.  Then comes earnings season & numerous forecast are being lowered.  Dow is absorbing all this fairly well, hanging in near its best levels since since mid May.

Dow Jones Industrials

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