The U.S. stock market is flirting with unchanged following yesterday's sell-off. The private-sector ADP report on employment came in worse than expected. While the productivity numbers were higher than estimated. Both reports suggest the jobs number on Friday might be worse than the markets hope for. There was a little weakness this morning on rumors of a major bank failure but the financials have recovered to fractional losses. Meanwhile the U.S. dollar is down and gold is breaking out to new relative highs.
Asian markets were mixed. The Chinese Shanghai index gained 1.1%. Its rivals were down in response to the big declines in the U.S. yesterday. The Hong Kong Hang Seng lost 1.7%. The Japanese NIKKEI gave up 2.3%. Trading was relatively quiet in Europe. Stocks drifted sideways under the unchanged market for most of the session. The English FTSE lost 0.04% and the German DAX lost 0.14%. Both marked their third decline in a row. The French CAC-40 closed up 0.2%.
The big report today was the ADP National Employment Report. This is a private-sector look at the labor market and investors watch it for clues on the official non-farm payrolls data. Economists were expecting the ADP numbers to come in at -250,000 jobs. ADP announced that the U.S. lost 298,000 in August compared to the -360,000 in July. Meanwhile the Labor Department said that second-quarter productivity soared from +0.3% in the first quarter to +6.6%. Economists were expecting a rise to +6.4%. The productivity report measures how much work is done per hour. If businesses are squeezing our higher productivity gains with their current workforce then there is less need for them to higher new workers. The Q2 jump was the biggest quarterly increase since 2003. These numbers don't bode well for the non-farm payrolls (jobs) report on Friday morning. There is a growing expectation that the unemployment rate will tick back up to 9.5% in August from the down tick to 9.4% in July.
The Commerce Department released the monthly factory orders data. June's order data was revised higher to +0.9% and July's came in at +1.3%. Unfortunately, this was below the estimate for a +2.2% gain. Most of the improvement came in the transportation sector with big gains for aircraft. Carmakers saw a jump after the "cash for clunkers" program.
Oil was making headlines again. Europe's second largest oil company, BP, based in London, announced they had made a huge discovery in the Gulf of Mexico. The new test well was a record-breaker. BP made the discovery about 250 miles southeast of Houston, Texas. This is very deepwater drilling. The test well was drilled at a depth of more than 35,000 feet. Current estimates put the new oil reserve at more than 3 billion barrels but that's a very early number and subject to revision. Furthermore the oil is so deep that it's going to take years to extract. BP estimates the well won't hit full production until 2020. In other news oil prices were reacting to the weekly inventory data. Last night the API report said oil inventories fell more than 3 million barrels. This didn't line up with the official EIA report that showed stockpiles falling 400,000 barrels. There was also a larger than expected drop in gasoline supplies. Oil is trading down under $68.00 a barrel.
It's a relatively quiet day in the markets. The S&P 500 index is off less than one point near 998. The NASDAQ composite is up about two points at 1970. The Dow Industrials are up less than two points at 9312. The small cap Russell 2000 index is down less than one point at 557.
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 movement I see that AAPL dipped to $164.11 and bounced but the intraday rebound is fading. Our stop loss is at $163.40. ATI is off 2.2% and testing support near $28.00 and its 200-dma. EOG hit our stop loss at $69.90. FISV is nearing short-term support at $47.00 but it's broken down under its 50-dma. LM has dipped to its long-term trendline of support and its 50-dma. The low thus far is $26.28. Our stop on LM is at $25.95. NEU is bouncing from support near $80.00. Banking stock STT is finding support near $50.00 but the bounce has been anemic. The USO is testing its long-term trendline of higher lows. A bounce from here could be a short-term entry point. FSLR, a put play, hit $112.09 this morning. Our second and final target is $111.00. More conservative traders may want to exit early now to lock in a gain.