4th of July Independence Day Weekend Stock Market Update

Friday, July 2, 2010
Commentary by Benjamin Train
and the Dow Jones news service.

US Stocks ended the week nearly flat, capping off the worst week of performance since May. U.S. stocks popped into positive territory late in Friday's session ahead of a long holiday weekend, despite disappointing jobs data that had pushed stocks into the red for much of the day.

Long Way To Go Before Economy Generates Jobs Needed. U.S. stocks are flat as end of a bruising week nears, with disappointing jobs data fueling worries about a second half slowdown in the economy. The US economy lost 125,000 jobs.

U.S. Assistant Treasury Secretary Alan Krueger said Friday's unemployment figures show the economy is heading in the right direction, but the rebound is a long way from producing the amount of jobs needed.

"We will not be able to reverse overnight two devastating years of recession and a decade of declining economic security for the middle class," Treasury's chief economist said.

The U.S. economy shed jobs in June for the first time this year and the unemployment rate remained high, moves that will likely add to concerns that the pace of the recovery could slow in the second half. The jobless rate edged down to 9.5% in June from 9.7% the previous month.

Krueger welcomed the improvement, but reiterated that the Obama administration remains "deeply concerned".

"We can't lose sight of the fact that 14.6 million people remain unemployed, and roughly another 9 million under-employed in some way," Krueger said, noting that nearly half of the unemployed have been jobless for more than half a year. "This jobs report is a disappointment for every family and every small business who heard President Obama declare just weeks ago that our economy is 'getting stronger by the day,'" House Republican Leader John Boehner (R., Ohio) said in a statement. "The writing is on the wall for President Obama's 'stimulus' policies and everyone - taxpayers, economists, and the rest of the world - sees it but him."

Consumer Bankruptcy Filings up 14 Percent through First Half of 2010
U.S. consumer bankruptcy filings totaled 770,117 nationwide during the first six months of 2010 (Jan. 1-June 30), a 14 percent increase over the 675,351 total consumer filings during the same period a year ago.

Many economic analysts and observers have projected growth - which is being strained by ongoing imbalances such as financial woes of state and local governments - will slow in the second half of the year. Economists also expect less stimulus support from federal government.

Trading is light ahead of the Fourth of July holiday weekend.

Investor fears of a slowing economic recovery deepened following the first drop in monthly non-farm payrolls this year and the biggest decline in factory orders in 14 months. The action comes after losses sustained this week as the second quarter ended with a thud and the third started on shaky ground.

The stock market is the best barometer of the economy, and the barometer isn't calling for smooth sailing. The consumer-discretionary sector led the S&P 500's declines as investors worried about how the drop in non-farm payrolls might hurt already-weak consumer and business spending.

New orders for U.S. manufactured goods drop more than expected by 1.4% in May to $413.25 billion, as transportation related orders tumble. Economists expected a 0.8% decline.

Nymex Crude Settles Down 81 Cents At $72.14/Bbl. Crude-oil futures fell Friday for a fifth consecutive day, capping their steepest weekly decline since early May, as disappointing economic data continued to point toward a stalling economic recovery.

Benchmark gasoline futures fell by almost 2 cents on Friday to $1.9777 a gallon. This is the first time since December that the gasoline contract declined for five consecutive days. It is also the longest string of declines going into the July Fourth holiday since 1986. August heating oil fell 2.3 cents, or 1.2%, to $1.9155 a gallon.

The dollar strengthened against the yen but weakened against the euro. The dollar traded lower against the euro, with the common currency at $1.2574. Treasurys were mixed, with the two-year note higher but the 10-year note lower.

Spot Gold closed at $1,211, while silver closed the week at 17.86/oz. The base price for industrial gold bullion was $1204.19 per troy ounce, down $32.56 from previous. It's selling price for gold in fabricated form was $1294.51, down $34.99.

US Retailers are expected to report a 3.4% increase in June same-store sales next week. Meanwhile, markets, many businesses and government offices will be closed Monday to observe the Independence Day holiday in the US.

Toronto stocks closed lower Friday, led by commodity producers, on persistent concern of the spillover to Canada from a weak U.S. economic recovery. Research In Motion, down 2%, was the most actively traded.

The S&P/TSX Composite Index fell 98.36 points, or 0.9%, to 11196.06. Declines exceeded advances, 954 to 520. Trading volume was 296.9 million shares, from Wednesday's total of 405.1 million shares. Canadian markets were closed Thursday for the Canada Day holiday.

The jobless rate in the euro zone was steady at 10.0% for a third consecutive month in May as an improvement in Germany's labor market offset a deterioration in peripheral states, official figures show.

European shares were unable to hold meager gains Friday, ending the day virtually flat as a rebound by automakers and miners was offset by weakness in the health care and technology sectors.

Of the major regional benchmarks, the U.K. FTSE 100 index rose 0.7% to settle at 4,838.09, the German DAX index fell 0.4% to 5,834.15 and the French CAC-40 index advanced 0.3% to 3,348.37.

The Stoxx Europe 600 index slipped 0.03 point to end at 237.20, slightly extending the five-and-a-half week low set Thursday on worries about the global economic recovery. The index ended the week 4.5% lower.

In Europe the number of unemployed workers across the 16-nation euro zone ticked higher in May, but the unemployment rate remained at a 12-year peak of 10% for a third consecutive month.

Emerging-market equity funds ended the first half of the year with $17.4 billion in net inflows, taking in far more than any other major stock fund category, according to data from EPFR Global.

Fiscal and debt crises in Europe have led many investors to seek greater exposure to the developing world, here growth prospects are more encouraging. France and Germany are on different sides of crucial issues in Europe's debate over its economic future. The awkward personal chemistry between their leaders has further complicated the countries' relationship.

Germany's lower house of Parliament approved a watered-down bill banning "naked" short-selling of all stocks and some euro currency derivatives.

Investors put the most money toward diversified global emerging-market stock funds, which absorbed $12.4 billion in the first six months of the year. Funds investing in Asia, excluding Japan, brought in $3.9 billion while Latin America funds recorded outflows of $2.3 billion as many market participants focused on the region's measures to tighten monetary stimulus.

Latin America's largest economy, Brazil, has already raised interest rates and more measures are expected in coming months. Brazil-specific funds lost $1.4 billion in the last two quarters.

In the same time frame, Russia funds took in nearly $2 billion, while China funds soaked up $1.2 billion.

As markets are closed over Independence Day weekend in the US, world markets will begin the week on mixed sentiment.

Enjoy your weekend. Good Evening!.