The major U.S. stock market indices were lower on Friday morning thanks to disappointing consumer sentiment numbers. The energy sector continues to under perform as oil resumes its decline. Investors are apprehensive about second quarter earnings, which really hit full force next week. Overall it was a down day across the globe but stocks are seeing post-lunchtime rebound off their intraday lows.
Declines in Asia were relatively mild but they were widespread. The Japanese NIKKI slipped 0.04%, almost unchanged, but still a decline marking its eighth loss in a row. Shipping stocks were weak on news that container rates to North America fell for the first time in years with many companies reducing their rates by 30%. The declines in Chinese stocks were overshadowed by big gains for a couple of new IPOs out today. The Chinese Shanghai index lost 0.29%. The Hong Kong Hang Seng lost 0.4%. Meanwhile in Europe the region posted its fourth weekly loss in a row. The English FTSE fell 0.7%. The German DAX gave up 1.1%. The French CAC-40 slipped 1.4%.
American consumer sentiment is one of the big stories today. Economists were expecting sentiment to stay relatively even at 70.5. Unfortunately, the early July reading saw sentiment slip to 64.6 from 70.8 in June. It's not surprising to see consumer confidence falling with rising foreclosures and rising unemployment. The RLX retail index is down about 0.5% on the session reversing yesterday's gains.
The Commerce Department also released the May trade numbers. As consumers cut back on spending imports fell and the trade deficit dropped to $26 billion in May, which is the lowest level since late 1999. It also marked the tenth monthly decline in a row for imports into the U.S. Again, this goes back to a shaken consumer, declining home prices, rising foreclosures and soaring unemployment, which all influence consumption and demand for imports.
Crude oil has been in the spotlight all week with an extremely sharp sell-off from its $73 highs. Yesterday it looked like oil might try and bounce from psychological support near $60.00 a barrel but the rebound has already failed. The International Energy Agency (IEA) came out with a new report suggesting that global energy demand will fall almost 3% this year. Crude oil futures slipped under $60 to hit new relative lows. Elsewhere in the energy sector Chevron (CVX) issued a warning last night that its refining margins had deteriorated, which would have a negative impact on earnings.
Currently the S&P 500 index is only down about 3 points at 879.50 as it hovers near previous support at 880 and its 200-dma. The NASDAQ composite is up about 2.5 points to 1755 as hit hugs the exponential 200-dma. The Dow Industrials are down about 45 points to 8138. The small cap Russell 2000 is up less than one point as it bounces to the 480 level and its 200-dma.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Scanning the OptionInvestor.com play list for movers I see that ESRX has broken down under support at $65.00 and hit our stop loss at $64.75. Our aggressive buy the dip play in the USO did not pan out but losses were very limited given the gap down this morning. AGU, which is an OI put play, is down about 4% and came close to hitting our first target today. CLB, an oil service stock, has collapsed again with a break under support at $80.00. Sears (SHLD) continues to sink as investors sell the morning pop. Meanwhile transports are seeing a bounce and UPS might be building a bullish engulfing candlestick pattern.