Intraday Market Update
After opening in positive territory this morning and surging right up to its 200-day SMA at 1106, the S&P 500 sold off -14 points reaching a low near 1,092. Commodity names and banks are under pressure which are leading the market lower. The gold miners and banks are among the worst performers, down -2.65% and -1.33% respectively. Large cap name Freeport McMoRan Copper & Gold (FCX) is down over -5% in mid-day trading. The selling was ignited at 10:00 AM when Factory Orders and the ISM Non-manufacturing Index missed consensus estimates. Then Goldman Sachs raised their non-farm payroll estimates for tomorrow's big employment report from 500,000 to 600,000, but the buying was short lived and the indexes turned back down.
All of the indexes are off of their lows. The NASDAQ and Russell 2000 are performing better than the S&P 500 and DJIA. The NASDAQ and RUT are teetering between positive and negative territory while the S&P 500 and DJIA are negative. All traders are watching the 200-day SMA on the SPX which is right at 1,106. It is also worth noting the 20-day SMA on the SPX is also just overhead at 1,111. The SPX has not touched its 20-day SMA since one month ago on May 3rd. Without a break above these levels or below 1,070 the S&P 500 finds itself in no man's land and signals choppy price action.
Today's economic reports were mixed but did not meet consensus expectations. The ADP Employment Report kicked things off with ADP estimating a +55,000 rise in private payrolls for May. ADP also revised April's number upward to +65,000 from +32,000. New claims for unemployment continue to come in at a steady rate and indicate no improvement in the labor market. Initial claims for last week were 453,000 compared to the consensus estimate of 450,000. Continuing claims were up +31,000 to 4.666 million for the week ending May 22nd. The four week moving averages for both of these measures has shown no real improvement for the past 2 months.
The ISM index of non-manufacturing businesses, which makes up almost 90% of the US economy, was unchanged for the third straight month at 55.4, however, consensus estimates called a reading of 55.9. Readings above 50 signal expansion. The employment component moved above 50 to 50.4 for the first time since December 2007. Based on the report's methodology 50.4 signals a net gain in hiring. And in the Factory Orders report, although orders increased +1.2% in May, the report missed consensus estimates of a +1.8% increase.
The economic reports are sending mixed messages about employment. On one hand we are not seeing improvement in jobless claims and continuing claims which signals firings and lay offs remain elevated. But on the other hand the ADP report indicates 55,000 private jobs were added in May and we are seeing employment gains in the ISM report as it posted its highest reading in two-and-a-half years. This is setting up an interesting employment report and potential market moving event tomorrow morning at 8:30 AM.
Commodities are mixed with Natural Gas surging +5% higher after a smaller than expected build in inventories. Front month crude also got some bullish inventory numbers but is about breakeven on the day. Gold and silver are taking a breather and are down -1% and -2% respectively. Copper is getting crushed and is down -3.00%.
International markets all sharply higher on Thursday with the exception of China which shed -0.73%. Notable winners in the Asia-Pacific region were Japan (+3.24%), Australia (+2.40%), and Hong Kong (+1.62%). In Europe notable winners included Germany (+1.23%), France (+1.59%) and London (+1.16%).
Core Sector List:
Overall reading: 11 sectors declining, 5 sectors advancing.
Strongest Sectors: Internet, Software, Utilities
Weakest Sectors: Gold Miners, Home Construction, Banks
S&P 500 - Daily and 30-minute Intraday Charts:
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