Stocks are trading in negative territory as investors react to a disappointing ISM services number. The ADP jobs report came in better than expected, which should bode well for Friday's jobs report. Meanwhile dollar strength is weighing on the commodities. Corporate earnings this morning have also been a disappointment for the market.
Asian markets were in rebound mode. Chinese stocks saw the biggest bounce. Investor concerns over the banks cooled. Two major energy firms were upgraded. The Hong Kong Hang Seng rose 2.2%. The Chinese Shanghai rallied 2.3% and closed back above the 3,000 level. The Japanese NIKKEI managed to close up 0.3% in spite of another bruising day for Toyota Motor (TM). Not only is Toyota facing increasing troubles over the sticky gas pedal problem but now there are complaints about inadequate braking for some of its Prius models.
U.S. Transportation secretary Ray LaHood really complicated matters with some ill-framed remarks this morning. Initially LaHood told reporters that consumers should stop driving their Toyotas if they had one of the 2.3 million vehicles being recalled for a sticky gas pedal. LaHood later changed his statement to "take your Toyota to the dealer" for repairs. Shares of Toyota are down another 5% near $74 a share but off its lows near $71.90 this morning.
European markets ran out of steam and gave up early morning gains to close in negative territory. Most of the major market indices ended a three-day winning streak. Miners and metal-related stocks led the decline. In England the Nationwide Building Society said their consumer survey showed a rise in consumer confidence for January. Meanwhile the Bank of England begins a two-day policy meeting on rates although no change is expected. The English FTSE lost 0.5%. The French CAC-40 gave up 0.49%. The German DAX fell 0.66%.
There were two significant economic reports out today, the ISM Services number and the ADP private employment report. Economists were expecting the ISM services number to rise to 51.0, with readings over 50 indicating growth and expansion. Unfortunately the January reading came in at 50.5 from a downwardly revised December number of 49.8. At 50.5 this is still the highest reading since May 2008.
Economists were looking for the ADP numbers to show a loss of 30,000 jobs. ADP, a private payroll firm, said that U.S. businesses only cut 22,000 jobs in January. It was the best report since February 2008. The ADP numbers tend to be worse than the official jobs report but it's moving the right direction. Another positive employment data point came from Challenger, Gray & Christmas, who announced that planned lay-offs in the U.S. fell to 71,482 in January 2010 compared to 241,749 back in January 2009. This Friday analysts are expecting the non-farm payroll report to show a gain of 5,000 jobs while unemployment ticks higher to 10.1%.
We are still in the midst of earnings season. A couple of the high-profile reports today were Pfizer (PFE) and Ryder (R). Dow-component PFE is down 2.5% and breaking under its 50-dma on a disappointing announcement. PFE delivered a profit of 49 cents a share, which was one-cent less than expected. Revenues soared nearly 34% to $16.5 billion, which was better than expected. PFE offered negative earnings guidance for 2010. Shares of Ryder (R) are down 9% after missing earnings by 6 cents. Analysts expected a profit of 47 cents and R delivered 41 cents a share. Ryder also issued negative earnings guidance for the first quarter. Another major earnings report will be Cisco Systems (CSCO) announcement tonight. Wall Street expects CSCO to turn in a profit of 35 cents a share.
The U.S. dollar is seeing a decent bounce. The UUP dollar ETF is back above its 200-dma again. This dollar strength is pushing commodities lower. The impact on oil has been mild with a 30-cent drop to $76.93 a barrel. Gold futures are down over $10 to $1,107 an ounce. Copper is really getting hurt with a drop under psychological support near $3.00.
Currently the S&P 500 index is flirting under the 1100 mark. The NASDAQ is trying to stay in positive territory near 2190. The Dow Industrials are down less than ten points trading just under the 10,300 level. The small cap Russell 2000 is off less than four points near 610.
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 I see that AAPL is seeing a bounce back toward what should be resistance near $200 a share. There is no follow through for JPM after yesterday's breakout above $40. MTD is bouncing and trying to breakout past the $100 level.