Rising joblessness and weaker than expected GDP data has investors worried about the second half of the year. The Supreme Courts landmark ruling on Obama care helped push the markets lower while giving hospitals a boost.
Initial jobless claims fell from an upwardly revised 392,000 to 386,000 in the week ending June 23. The number is still high,despite the larger than expected fall. The four week moving average of initial claims also fell this week, by 750, to 386,750. The trend in jobless claims is still to the upside and at elevated levels.
Continuing claims fell by 15,000 to a seasonally adjusted 3.3 million. This number has been holding steady over the last month, just off this years lows.
Total claims for unemployment, which lags initial claims by two weeks, gained for the first time this year. Total claims rose by just over 71,000 to 5.9 million. The rise in initial and continuing claims during June is starting to make itself seen in the total claims figures.
The final revision for first quarter GDP was also released today. The number was confirmed at the previously released 1.9%. The release was not unexpected but some of the internal figures were below expectations and are leading further speculation on the quality of growth in the second half of the year. Consumer spending, which accounts for about 70% of US economic activity, grew by 2.5%, slower than the previously estimated 2.7%. Exports and business inventories also grew less than expected. Exports gained 4.2% versus the estimated 7.2% and business inventories grew by $54.4 billion, $3.3 billion less than expected.
Speculation over the second quarter outlook was over shadowed by the supreme court ruling on Obama care. The court ruled that the law as written is constitutional and sparked heated debate. Health care stocks jumped on the news while health insurers declined. The Health Care Spider (XLV) dropped today on heavy volume. The downward move was halted at the 30 day moving average, which is pointing up. The ETF is approaching resistance at $38.
Health Care Spider, daily
Health care providers like Universal Health Services and Team Health Holdings made significant gains on the supreme court ruling. These companies provide health services in the form of hospitals, clinics and staffing, all areas set to benefit from the new health reform laws. Universal Health Services climbed more than 7.5% on high volume. Team Health Holdings also gained significantly, climbing close to 9% today and making a new all-time high. Today's gains could be short lived as the health law is not yet in effect.
Universal Health Services, daily
Team Health Holdings, daily
Oil fell again today on continued worries of Eurozone trouble and slowing world growth. Light sweet crude led the decline, losing $2.31. Brent crude and gasoline also fell. The iPath S&P Crude Oil Total Return ETF (OIL) fell today in tandem with the drop in crude prices. The ETF has been trending down for two months and broke long term support in today's session.
iPath S&P Crude Oil Total Return ETF, daily
Gold and other precious metals were also hit hard today. The price of gold fell more than $27 during the day, coming close to $1550 an ounce. Silver was the hardest hit of the metals, losing more than 2.5%. The CBOE gold index fell by 2% today.
CBOE gold index, daily
JPMorgan hit the headlines again today. This morning a release stated that losses from the London Whale could total $9 billion. Later on in the day, further reporting revealed that the estimation was more than a month old, was a worst case scenario and that JPMorgan has nearly completed exiting the bad trades. Shares of the stock fell below the short term moving average for a time before rallying into the close.
The Financial Sector Spider is trading near the middle of its 12 month range. The ETF fell about 1.5% intraday but recouped most of the days loss before the closing bell.
AOL announced a $400 million stock buyback plan today. The move is the first of several that are re-investing proceeds from patent sales to Microsoft earlier this year. The stock jumped in early trading and managed to hold onto some of the gains through the close of trading. Today's jump in price pierced a resistance level and could signal further advancement.
Rupert Murdoch's announcement of the splitting of News Corp has kept the stock price up this week. The stock made a break out earlier this week and looks strong in the near term.
News Corp, daily
About two dozen companies released earnings statements today. Nike, Smith & Wesson, Family Dollar and Research in Motion were prominent on the list. Nike shares were hit hard during the day in anticipation of earnings released after the bell. The shares continued their fall in after hours trading when Nike announced it's profits were shrinking in the face of growing revenue.
Smith & Wesson announced after the bell that quarterly and yearly profits increased by 27 and 20% respectively. The gains were made on improving sales and reduced overhead costs. The stock climbed in after hours trading, gaining roughly 10%.
Smith & Wesson, daily
Family Dollar stores reported the 17th consecutive quarter of double digit earnings growth. Comparable store sales drove earnings growth with a 5% increase over last year. Earnings per share were $1.05, a company record. Total income in the period increased by over 12% and were positively impacted by two sale-leaseback transactions. Management also reaffirmed this years guidance in the statement. The stock opened sharply lower but found support during the day.
Family Dollar, daily
Research in Motion also reported after the bell today. The Blackberry maker has been struggling with sales of its Blackberry devices and a new CEO this year. The Zacks consensus estimate was for a loss of $0.02 per share, a massive 100% drop from the same period last year. The actual results were far worse. RIMM posted a net loss of $0.99 per share and has pushed back the release of Blackberry 10 until early 2013. In the release the company also stated that it is going to be laying off 5,000 employees. The shares, which had been suffering, took a beating in after hours trading dropping close to 20%.
Research in Motion, daily
Stifel Nicolas initiated coverage on Ford Motor Company with a hold rating. Slow sales were cited as a reason for the rating. Several other analysts have been commenting on Ford recently with an average price target around $12. The stock is currently trading around $10, where the stock has had support in the past.
Ford Motor Company, daily
The volatility index climbed earlier today, crossing back above the 20 level, but fell before the close to end the day at $19.71.
Volatility Index, daily
Futures were down about 80 points this morning before the release of economic data. The basically expected news failed to move the markets one way or the other. After the open, the major indexes maintained their ground until the Supreme Court ruling on Obama care added bearish momentum to the mornings trading. Following the announcement stocks began to slide, hitting their lows for the day around 2:30.
A late day rally brought the Dow Jones index back up above 12500, a previously important support/resistance level. Today's move was made on weak volume and mixed internals. Advancing stocks were outnumbered by declining stocks by about 1:2 for most of the day. The Nasdaq suffered more than the NYSE or AMEX, with an advance/decline ratio closer to 1:3. The afternoon rally brought more stocks into the green.
Dow Jones Industrial Average, one day
Dow Jones Industrial Average, daily
The S&P traded in a similar range as the Dow. The broader index recovered enough ground to close just below the short term moving average. Momentum remains weakly bullish.
S&P 500, daily
The Nasdaq suffered the steepest loss today, closing down by more than 1%.
I am expecting to see more sideways market action as traders and investors prepare for the second half of the year. The economic data is mixed, showing a growing but listless economy and deteriorating business conditions. Tomorrow look out for Personal Income and Spending figures, Chicago PMI reading and the Michigan Sentiment indicator. Next week look out for June data including car sales and job creation figures.