Intraday Market Update
US equities are oscillating between positive and negative territory, but so far have overcome disappointing employment reports ahead of tomorrow's jobless claims report and Friday's non-farm payroll report. The ADP employment report showed an unexpected decline in private sector jobs of -39,000 in September, which follows 7 straight monthly gains. Meanwhile, the number of planned layoffs by US corporations increased in September. Technology stocks are getting hit hard with more than -1% losses in the NASDAQ and QQQQ after a few downgrades and guidance warnings. The DJIA and S&P 500 are doing better but are still in the red. The 10-year US Treasury yield has collapsed below 2.40% for the first time since January 2009 at the heart of the financial crises, while the 2-year and 5-year yields continue making fresh all-time lows. Commodities remain strong in the face of continued weakness in the US Dollar. Gold prints another new all-time high of $1,351 per ounce, while front month crude has gained +0.65% and is shrugging off bearish inventory data. Equity markets overseas posted solid gains following yesterday's strong rally in the US.
The ADP Employment report showed private sector payrolls fell by -39,000 jobs in September compared to estimates calling for a +20,000 increase. August's -10,000 decrease was upwardly revised to a +10,000 gain which makes September's decline the first in 7 months. ADP's report does not include government employment and precludes Friday's broader non-farm payrolls report which is estimated to be flat after declining -54,000 in August. Private sector jobs (excluding government jobs) are expected to increase +75,000 in Friday's report.
Meanwhile the Challenger Job-Cut report showed that employers announced 37,151 layoffs last month which is up +7% from the 34,768 job cuts reported in August. The firm said "the low job cut numbers we are seeing in almost every sector does not necessarily translate into increased hiring. There is hiring going on in the economy, but it is not enough make a discernible dent in the number of unemployed." The September job-cut figure was down from a year ago when the report found 66,404 planned layoffs. Employers have announced 411,272 layoffs YTD which is nearly -64% below the 1,136,908 layoffs announced at the same time in 2009.
Mortgage applications to purchase new homes increased +9.3% last week, although the jump was firmly centered in a +17.2% surge in FHA applications. This precedes the October 4th deadline for borrower qualification changes by the FHA that requires higher credit scores and higher down payments. Conventional purchase applications rose +3.6% while refinance applications -2.5%. The average 30-year mortgage rate decreased to another all-time low of 4.25%.
In equities, data center and cloud computing stocks are getting hit hard today after Equinix (EQIX) cut guidance citing underestimated churn and pricing assumptions in North American. EQIX is down more than -33% while other high flyers in the space like VM Ware (VMW), Riverbed (RVBD) Salesforce (CRM), F5 Networks (FFIV), Red Hat (RHT), and Isilon (ISLN) are down around -10%. The semiconductor sector is down more than -2% after Morgan Stanley downgraded some of the equipment names like Altera (ALTR) and Xilinx (XLNX).
In earnings, wine and spirits maker Constellation Brands has gained +4% after a -2% gap lower. The company beat earnings and revenue estimates, although revenue declined -2% y/y. The company said it experienced improving US wine depletion trends and retail execution despite an uncertain consumer and competitive environment. Monsanto (MON) is positive but -4% off of its highs, despite issuing full year 2011 EPS guidance that was below estimates in its earnings report. The company said sales of its seeds and genomics segment were boosted by higher corn and cotton revenues, which helped offset the lower sales for the agriculture productivity segment due to pricing pressure of Roundup and other glyphosate-based herbicides. COST has recovered from a -2.5% gap lower at the open to near unchanged after the company beat earnings estimates but fell short on revenue estimates, although same-store sales increased +5%.
Core Sector List:
Overall reading: 4 sectors advancing, 16 sectors declining
Strongest Sectors: Miners, Oil, Broker Dealers
Weakest Sectors: Semi's, Internet, Software, Retail
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