After The Close - The U.S. stock market got off to a weak start this morning, and continued to sell off into the afternoon. The initial weakness was likely due to a few mixed economic reports that came out this morning. According to the Department of Labor, initial jobless claims for the week ended April 28th, came in at 365,000, which was somewhat lower than many had expected. Weekly continuing jobless claims also showed some improvement. Although, this was a positive development, traders were not likely getting too excited, given the upcoming release of the Government’s Non-Farm Payroll figures due out tomorrow morning. Then at 10:00 AM (EDT) today, The Institute for Supply Management released its Services Index for the month of April. The Index provided a reading of 53.5, which fell well short of the 55.5 figure analysts had been expecting, and was also lower than last month’s reading of 56.0.
Meanwhile, the earnings reports kept rolling in, with mixed results, too. Green Mountain Coffee (GMCR) saw its shares plunge, after the coffee maker posted a weaker-than-anticipated top line, and offered a disappointing outlook. In the energy area, we received a report from offshore driller Transocean (RIG). That stock was up slightly, despite a mixed report. In technology, JDS Uniphase (JDSU) shares traded lower, after that company posted a weak quarterly report. Also weighing on the market today, were the numerous retail companies that issued same-store sales figures for April.
At the end of the day in New York, the market had managed to pare its losses somewhat. Overall, the Dow Jones Industrial Average lost 62 points (-0.5%); the S&P 500 Index was off 11 points (-0.8%); and the NASDAQ, which led the market lower, surrendered 36 points (-1.2%). Market breadth was negative, with declining stocks outnumbering advancers by about 2 to 1 on the NYSE, with greater losses on the NASDAQ. The market’s sectors were all in negative territory. The basic materials, energy, and technology shares slipped sharply. As was the case yesterday, there was some relative strength in the consumer names.
Technically, the market pulled back today, after some strength a few days ago. As noted, it may take a few attempts for the market to successfully break into new high ground, if it can in fact do so at this time. Today’s move puts the S&P 500 back just above its 50-day moving average, located at 1,387. Hopefully for the bulls, the Index will find some support near this area. – Adam Rosner
At the time of this article's writing, the author had a position in JDS Uniphase (JDSU).
12:30 PM ET - Stocks are trading lower after weaker-than-expected economic data were released at 10:00 a.m. (EDT). Specifically, the ISM nonmanufacturing index for April came in at 53.5, rather than the projected 55.5. The reading for March was 56.0. The silver lining is that any number above 50.0 indicates expansion, which was enough of a positive to keep losses in check.
Just past the noon hour on the East Coast, the Dow Jones Industrial Average and the NASDAQ are off 43 points and 27 points, respectively. Market breadth is bearish, with about two stocks falling for every one rising on the New York Stock Exchange Composite.
The day started out on a upbeat note, with weekly initial jobless claims coming in lower than forecast. That was in contrast to yesterday’s lackluster Automatic Data Processing (ADP) payroll report, and lent some optimism that tomorrow’s widely watched government employment report might at least live up to expectations. Job gains are critically important to fuel consumer spending, which by far makes up the biggest part of the economy.
But neither a smaller-than-predicted drop in productivity nor Spain’s debt sale did much to excite the bulls. Spain had to pay higher yields to entice investors. There is also a lingering uneasiness with respect to prospects for the European Union’s stability.
At the sector level, airline stocks are among the day’s winners, including USAirways (LCC) and Atlas Air Worldwide Holdings (AAWW). Airline shares are benefiting from a $2-a-barrel drop in the price of oil on the day. Utility stocks are also holding their own. In fact, the Dow Jones Utility Index is now modestly higher year to date, after being in negative territory for most of 2012.
Lagging sectors include basic materials and energy. Shares of gold miners, including Barrick Gold (ABX) and Newmont Mining (NEM) are weak. Oil producers, such as Murphy Oil (MUR) are also having a tough day with the drop in oil prices.
Elsewhere, there is some potentially good news for the housing sector, which has lately shown more signs of life. The yields on 15-year and 30-year mortgages have hit all-time lows, with 30-year mortgage now at 3.84%. That should boost the incentive for anyone looking to purchase a home.
Overall, the mix of economic news, earnings reports, and developing events in Europe favors the bears so far today. The tone of trading seems to be affected by concerns that tomorrow’s big employment report may not live up to its billing. - Robert Mitkowski Jr.
At the time this article was written, the author did not have positions in any of the companies mentioned.
Stocks to Watch from The Survey – Earnings season remains in full swing today. Coffee roaster Green Mountain (GMCR) grabbed headlines after reporting disappointing March-period results and cutting its forward-looking guidance, causing the stock to plunge in premarket trading. Investors were not thrilled with results from casino operator MGM Resorts (MGM) and petroleum producer Apache (APA), either, and both stocks are lower in the premarket. Some companies delivered upside surprises, however, such as grocer Whole Foods (WFM) and automaker General Motors (GM).
Investors also have their eyes on the retail sector, as a host of companies reported April comparable-store sales figures this morning. Results were mixed, as stores appeared to struggle in the face of an early Easter and elevated gasoline prices. Indeed, shares of Gap (GPS), Costco (COST), Target (TGT), and Macy’s (M) are all lower in the premarket. On the flip side, teen retailer Zumiez (ZUMZ) delivered good numbers, as American Eagle Outfitters (AEO) did yesterday.
After the market closes today, packaged-food giant and Dow-30 component Kraft (KFT – Free Kraft Stock Report) is scheduled to report earnings. – Matthew E. Spencer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - A disappointing report on private-sector job creation last month and more signs that recession is spreading across the troubled euro zone combined to take the measure of the bulls yesterday. But this was hardly a rout that we are speaking of, as the major averages were largely mixed, although there were more stocks losing ground on the Big Board than gaining in value.
All told, the Dow Jones Industrial Average shed 11 points and the Standard and Poor's 500 Index lost almost four points. On the other hand, the NASDAQ added nine points on some strength in selective technology stocks.
As for the data, a report was issued before the market opened yesterday showing that ADP's (ADP) private-sector survey had posted an addition of 119,000 positions last month, more than 50,000 below the 175,000 job additions that had been expected. Now, there is some correlation between this survey and the larger, and more closely watched, U.S. payroll report set for release tomorrow morning at 8:30 (EDT). However, this correlation is by no means strong, and recent months have shown some notable deviation, which may be one reason that the stock market did not react more strongly to the downside. As for tomorrow's report, expectations are that almost 170,000 non-farm payrolls were created in April. Consensus also holds that the unemployment rate, also issued at that time, will show that joblessness held at 8.2% last month.
As for Europe, the region's unemployment rate has climbed to a record 10.9%; Spain is now officially in recession, as is the Netherlands; and there are fears that upcoming bond auctions will not go well. Then, there is the coming presidential runoff election in France to concern investors on both sides of the Atlantic. Expectations are that the Socialist candidate will defeat the current president, Nicholas Sarkozy. Most pundits sense that such an outcome will not go down well with investors both in Europe and in the United States.
Then, too, there are earnings reports to consider, which continue to be issued for the first quarter, albeit the pace of such releases is beginning to taper off. Overall, the latest quarterly earnings season has been a good one, but there have been some notable profit misses in recent days, such as yesterday's report from Chesapeake Energy (CHK), a release that shook the stock causing it to lose nearly 15% of its value in the session.
Moreover, there is the economy at home going forward to consider as we approach a new day on Wall Street. Here, in addition to tomorrow's payroll report, we have also had the issuance, just moments ago, of a report showing that first-time jobless claims had tumbled by 25,000 in the latest week, falling to 365,000. A drop of just 10,000 had been forecast. Also, productivity dropped by 0.5% in the first quarter, which was a tad less than the 0.8% decline that had been expected. Later on this morning, we will get the monthly report on nonmanufacturing activity from the Institute for Supply Management, the same group that on Tuesday reported a nice gain in manufacturing activity in April.
Finally, there is the stock market, where the futures had been up slightly before the jobless claims issuance, but have since firmed up a bit more in the wake of this report's better-than-expected result, presaging a higher start for the market when trading gets under way in about a half hour from now. – Harvey S. Katz
At the time of this report's writing, the author did not have positions in any of the companies mentioned.