Future's for the major market indexes were slightly lower going into today's open. A string of mixed domestic economic data hit the market today, following yesterday's holiday, that failed to spark a rally. Job data is still lackluster and other indications are uninspiring. World banking leaders announced a number of moves in efforts of further quantitative easing.
Initial jobless claims came in much lower than expected at a seasonally adjusted 374,000. Analysts had been expecting a much smaller drop of 2,000. The previous weeks data was revised upward as well by 2,000 to 388,000. The four week moving average of initial claims dropped by 1500 but remains near the years highs.
Continuing claims continued to rise in this weeks data, as laid off workers fail to find new jobs. Claims for a second week of unemployment benefits rose by 4,000 to 3.31 million Americans.
Total claims for unemployment for the week ending 6/17 fell to 5.87 million. This is a tic down from last week buts still above the years lows.
ADP released its estimates for June non-farm payroll additions. They are estimating that the US non-farm sector added 176,000 new jobs in June, compared to 136,000 in May. Job increases for the month of June were led by the services sector. The US Census Beaureau releases its own data for June employment tommorow. The comprehensive reading is expected to be in the range of about 90,000 new jobs for the month. This is a bit lower than the 125,000 level that economist believe will get the US economy back on track.
Jobless and job creation data failed to rally the market after the open. The Dow hung around -60 for the first half hour until the ISM services gauge came in weaker than expected. The reading was reported at 52.1%, near contraction and 0.8% lower than forecast. This is the lowest level for the indicator since January , 2010. Data within the reading reveal that employment is up within the sector while production and new orders have fallen.
Banking leaders around the world announced further policy easing in a seemingly syncronous effort at economic stimulus. The Bank of England held steady with its key interest rates but did announce an increase in asset acquisition totaling 50 billion Euros. In a similar move ECB chairman Mario Draghi announced that the central bank would lower the benchmark rate by .25% to an all time low of .75%. The ECB also lowered its overnight deposit rate for banks to 0% in hopes of stimulating inter-bank lending.
Reports from China this morning announced that the government had cut its key lending rate for the second time in a month. The Chinese central bank lowered its one year deposit rate on the Yuan by 25 basis points and the lending rate by 31 bps. The central bank also relaxed the rules on lending for the country's banks by allowing to lend at a rate 70% below the benchmark.
European shares posted modest declines on the slew of economic information from around the world. The CAC 40 led the decline with a -1.41% loss, followed by the XETRA DAX's -0.89% and the FTSE 100 with a much smaller -0.15% retreat. Asian shares ended a little bit more upbeat with the Nikkei losing -0.27% and the Hand Seng gaining +0.5% and the Shanghai Composite shedding -1.17%.
The price of gold fell about -0.8% following the European and Chinese rate cuts. The CBOE Gold Index lost about -.5% in response to the decline in gold prices. The index is still above the short term moving average, a level regained earlier this week.
The prices of oil and gas traded mixed today. Oil inventory data was released today due to the Independence Day holiday yesterday and revealed a larger than expected decline. Oil inventories fell by 4.3 million barrels in the last week but the diminished supply did not outweigh speculation over the slowing economy and global demand. The prices of gasoline and Brent crude however rose in today's trading. The iPath Total Return Crude Oil ETF dropped about 1% today but remained above the short term moving average.
The nations retailers who participate in providing comparable store sales figures release their data today. The sector as a whole was dissapointing but there were a few bright spots. The stagnant jobs market and sluggish global economy has had its impact on the sector and has caused some companies to revisit this years guidance. Cato Group was one of the biggest dissapointments. The stock posted one of the days biggest percentage declines. The chain of women's apparel retailers posted a whopping 10% drop in comp store sales during June, down from the 3% increase in May. The company reported the declines as â€œbelow expectationsâ€ and continues to open and continues to make adjustments to operations in effort to improve results.
Target reported a 2.6% gain in same store sales for the five week period. The increase was at the low end of their own expectations but above analyst estimates. The company's CEO restated that the company is expecting to perform as previously stated in earlier guidance. The stock traded in a wide range today but was able to stay above the short term moving average.
Limited Brands made an impressive 7% gain in comparable store sales. The operator of brands like Victoria's Secret also reported a 7% gain in sales for the quarter-to-date. Net sales for the period are slightly lower than last year but when adjusted for one time gains made last year attributable to sales of business assets are ahead of last year. The stock made a 5% jump today on a mild spike in volume and improving technical indicators.
Kohl's posted a larger than expected decline in comparable store sales but was able to maintain its guidance for the quarter but at the low end of the expected range. The stock made a 7% jump today on high volume to come right up to a resistance level.
Two coal companies were among today's most heavily traded stocks. James River Coal and Patriot Coal both made high volume breaks above their short term moving averages today. The coal sector has been hit hard over the last six months but expectations for record demand out of China has speculators moving toward the sector. James River Coal Company rose more than 16% today and could spark some short covering. Patriot Coal gained a stunning 25% in today's session.
James River Coal Company, daily
Patriot Coal Company, daily
The energy sector as a whole helped to lead the entire market lower, posting the biggest losses among the S&P sectors. The Energy Sector Spider fell by about 1.5% today. The ETF has recently broken above its short term moving average but is facing resistance at $70.
Energy Sector Spider, daily
Apple was heavily traded today as well. The stock broke back above $600 for the first time in two months. Rumors of a new â€œminiâ€ i-Pad were out in the news and could have something to do with today's gain in the stock. Apple appears to have solid support at the $550 level and is moving up from there with supportive technical indicators.
Netflix shares surged over 10% today on news the company's streaming business is booming. The company's CEO boasted on Facebook that over 1 billion hours of entertainment were streamed from the website. This comes on the heels of bullish comments from a Citi analyst earlier this week. Option activity in the stock is about three times normal with put/call ratio at 0.44.
The banking sector was also fairly active today. Bank of America, JP Morgan and Citigroup all traded down today following the moves made by the European and Chinese central banks. JP Morgan made the biggest decline, leading the entire sector lower. The entire sector is facing a lot of headwinds, including heavy technical resistance. The Financial Sector Spyder just crested a one month high on waning momentum as it approaches resistance at $15 and $16.
Bank of America, daily
JP Morgan, daily
The Dow Jones Industrial Average traded down today by about -.35% on very light volume. The economic data today was more or less as expected and have not given any new insight into the second half of the year. The moves made by the Chinese and European Central Banks could help stimulate economic growth in the second half of 2012 but the question of whether or not it is enough is still being asked. The Dow is approaching long term resistance set during the steep decline of 2008 and currently has bearish momentum. Tomorrows job report could be the catalyst to move the market higher but I think it will take more than one months data to make any significant bullish impact right now. The shorter term chart suggests that the Dow is at resistance and the index's momentum is divergent from the most recent short term high.
The S&P 500 is similiarly positioned, approaching long term resistance set back in 2008. Momentum is divergent from the short term advance from June into July and suggests weakness.
S&P 500, daily
The Nasdaq managed to eke out a gain today, led by tech stocks. The index is also at a one month high trending weakly.
Tomorrow watch out for two important numbers from the job sector. US non-farm payroll numbers and the unemployment rate for June. The non-farm payrolls number is expected to be around 90,000 but I have seen estimates ranging from 50,000 to 150,000. The unemployment number is expected to remain steady at 8.2% in light of the recent up-tick in jobless claims.