Stocks continued to slip lower on this quiet, low-volume, option-expiration Friday. Yesterday's disappointing initial jobless claims and Philly Fed report has sapped any strength from the global markets. Investors are worried the slowing economic growth in the U.S. could encumber the global recovery efforts. Money continues to flow into safe-haven securities like bonds and the U.S. dollar. The dollar has rallied to a new four-week high against the euro. This dollar strength and worries over demand are pushing crude oil prices lower with oil down another -1.5% to $73.28 a barrel. Even gold saw some minor profit taking today with a $5.80 loss to $1,229.60 an ounce. The bond market continues to rally and yields on the 2-year U.S. treasury fell to a new all-time low of 0.487%.
Asian markets turned lower on Friday as they reacted to Thursday's economic data in the U.S. The bounce in the Japanese NIKKEI has reversed with today's -1.9% decline. The Hong Kong Hang Seng is off -0.4% and the Chinese Shanghai index is down -1.7%. Although it is worth noting the Hang Seng is only down about -3% from its August highs. The Shanghai is near four-month highs and looks poised to breakout over resistance in the 2690-2700 area. The search for safety continues in Europe with the yields on the 10-year and 30-year German bonds falling to new all-time lows. The German 10-year bond yield slipped to 2.26% and the 30-year yield dipped to 2.89%. Axel Weber, a member of the European Central Bank and potential replacement for ECB President Jean-Claude Trichet, made headlines today. Weber believes that the ECB should not withdraw any stimulus from the economy until next year. Naturally the market interpreted that to mean the European economy is weak and will continue to struggle the rest of 2010. At the end of the day the English FTSE lost -0.3%. The German DAX fell another -1.1%. The French CAC-40 lost -1.3%.
This morning the U.S. Labor Department issued some details on the most recent employment data. The jobless rate rose in 14 states last month while falling in 18 states. This was a decline from recent months, which saw unemployment falling in 30 states. After four years of having the worse unemployment rate in the country the state of Michigan has been surpassed by Nevada, which saw unemployment hit a new all-time high at 14.3%. Michigan's unemployment slipped 0.1% to 13.1%.
Investors were unimpressed with earnings from a couple of technology heavyweights last night. DELL and HPQ both reported earnings on Thursday. HPQ met estimates with a profit of $1.08 a share while revenues were slightly above expectations at $30.7 billion. HPQ guided in-line and shares have broken down to a new one-year low under support at the $40 level. DELL managed to beat expectations by 2 cents with a profit of 32 cents a share. Revenues were also slightly above Wall Street's expectations at $15.53 billion. The bad news in the report was a drop in gross margins from 17.7% to 17.2%. DELL pretty much guided in-line. The stock sold off this morning but has since pared its losses and is flirting with unchanged at the moment.
Overall it's been a pretty quiet day on the news front. Technically the S&P 500 is breaking down to new relative lows. A few market pundits are pointing to the May 6th "flash crash" lows near 1065 as possible support. The low today on the S&P 500 is 1063.91. It does look like we're seeing a bounce in the last hour. The NASDAQ is certainly paring its losses after testing the 2160 level. The Russell 2000 index dipped to 601.69 at its worst levels but has since reduced its loss to just -0.5%. A notable pocket of strength today is the SOX semiconductor index, which is up +0.7%. Utilities, retailers, and most of the tech sector (disk drives, Internet, networking) have all turned positive.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Russell 2000 index:
Chart of the U.S. dollar ETF (UUP):