The major stock market averages are flirting with positive territory but the trend is sideways as investors wait for tomorrow's jobs report. Economists are expecting Friday's jobs number to come in at -130,000 for November compared to -190,000 in October. A few optimistic analysts out there are hoping for a number under -100,000. While we wait for tomorrow's report there were a lot of news stories out today with the ISM Services number, productivity, November same-store sales, weekly jobless claims, and last night's announcement from Bank of America. Meanwhile a minor drop in the dollar is providing a small boost for commodities. Oil is trading around $76.50 a barrel and gold is near $1,214 an ounce.
Asian markets were mixed. The Japanese NIKKEI was the best performer with a 3.8% gain fueled by a drop in the yen. Thursday marked the fourth gain in a row for the NIKKEI and the Hong Kong Hang Seng. The Hang Seng rose 1.19%. The Chinese Shanghai index ended a three-day winning streak with a 0.16% decline.
On the other side of the globe the European markets were generally flat to down. Profit taking in miners was offset by strength in the financials. In Britain the Chartered Institute of Purchasing and Supply/Markit activity index fell from 56.9 in October to 56.6 in November. Economists were predicting a rise to 57.0. Numbers over 50.0 indicate expansion. The English FTSE lost 0.27% on the session. The German DAX fell 0.2%. The French CAC-40 was relatively flat at +0.08%.
The markets had plenty of economic data to chew on. The Institute for Supply Management released their services index, which covers finance, healthcare, housing, insurance, retailing, transportation, and utilities. Economists were expecting the ISM services number to rise from 50.6 in October to 51.5. Unfortunately November's number fell to 48.7. Numbers under 50 represent contraction.
If the unexpected drop in services wasn't bad enough retail same-store sales numbers came in worse than expected. Many analysts were hoping for pretty good numbers from the retailers because last year's retail sales were so horrible it made year over year comparisons so easy. Yet consumers remain cautious with unemployment at a 26-year high. There were a couple of stores that managed to post gains but overall same-store sales fell 0.3% compared to a drop of 7.8% a year ago. It is worth noting that today's figures do not count the world's largest retailer Wal-Mart (WMT) nor do they could any online sales. The government will come out with their own retail sales figures on December 11th.
Speaking of government figures the Labor Department said weekly initial jobless claims fell another 5,000 to 457,000 last week. This is the fifth straight week of falling jobless claims and should bode well for Friday's jobs report. In a separate report the Labor Department announced that productivity gains surged to a six-year high as employers do more with less staff. The pace of productivity in the third-quarter rose by 8.1%, which was the biggest gain since 2003.
One of the biggest stories today was the announcement from Bank of America (BAC) last night. The bank said they would repay the government for its $45 billion in TARP funds. BAC plans to use about $26 billion in cash and nearly $19 billion from the sale of "common equivalent securities". These warrants will eventually convert to common stock, which is dilutive to current shareholders. Yet the market doesn't seem to care about the dilutive effect. Investors were more excited to hear that BAC was paying back the TARP. The news sparked a wave of bullish upgrades for the stock. Shares of BAC gapped open higher and hit $16.74 intraday. Currently BAC is up about 3.7% near $16.25. The banking sector rallied this morning on the news but has since pared its gains and the banking indices are currently in negative territory. While I'm on the subject of banks Freddie Mac announced this morning that mortgage rates have hit a new all-time low. The rate for a 30-year fixed mortgage hit 4.71% compared to April 2009's low of 4.78%. This should be great news for the housing industry but anyone who can refinance probably already has. Not only that but to get the best rates on a new mortgage you have to have great credit and produce a 20% down payment.
Currently the S&P 500 is up less than two points at 1,110. The index hit a new 2009 high early this morning at 1,117. The NASDAQ composite is up almost ten points and nearing resistance at the 2,200 level. The Dow Industrials are up less than seven points at 10,458. The small cap Russell 2000 index is up less than three points and inching toward resistance at the 600 level. It's worth noting that the SOX semiconductor index is showing relative strength with a 1.9% gain and breaking out past its November highs.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
The market is trading sideways ahead of tomorrow's jobs report. Naturally we're not seeing a lot of movement on the OptionInvestor.com play list. The IYF did hit our trigger to buy calls this morning. Plus, PCP and VRTX are showing a little bit of relative strength. Our put play on GMCR has hit our first target to take profits near $60.00.