Market Close - Mixed Signals Ahead

Thursday, July 15, 2010

The market close Thursday afternoon, July 15th - Sent mixed traders plenty of mixed signals ahead of the close.

Financials fueled a decline in U.S. stocks as new signs of a cooling economy lowered hopes for a robust recovery, threatening to snap a seven-day winning streak. Investors retreated from the equities market after a mixed bag of economic data stoked concerns an economic recovery is proceeding more slowly than hoped. The passage of a major financial-overhaul bill by the U.S. Senate added to worries about the fragile banking sector.

US stocks pared losses Thursday after energy giant BP announced that they have stopped oil leaking from a blown well in the Gulf of Mexico and top bank Goldman Sachs agreed to pay a record settlement over fraud charges. The Dow Jones Industrial Average of 30 blue-chip stocks fell 7.41 points (0.07 percent)

The third straight month of declines in Labor's Producer Price Index raised new concerns about the possibility of deflation, a prolonged period of falling prices which has not been seen in the United States since the Great Depression of the 1930s.

While most economists believe outright deflation remains a distant threat, they said it can't be totally ruled out.

Dow 10,359.31 -7.41 (-0.07%)
S&P 500 1,096.48 +1.31 +0.12%)
Nasdaq 2,249.08 -0.76 (-0.03%)
Crude Oil 76.79 + 0.22%
Natural Gas 4.60 + 0.35%
Gasoline 2.07 + 0.45%
Heating Oil 2.03 + 0.38%
Gold 1209.43 + 0.09%
Silver 18.33 + 0.22%
Copper 3.01 + 0.40%
U.S. Dollar Index: 82.30 (-1.35%)

The PPI continues a downward trend and points to a lower market. The reduction in "initial" jobless claims is good but these are initial jobless claims. Doesn't initial imply new layoffs? The fact it's still over 400k is concerning. Continuing jobless claims jumped this week, perhaps census workers coming back on the benefits roll + people are dropping off the roll as their benefits run out. So the fact continuing claims jumped seems a negative for the economy. The Fed saying it will take 5+ years for the economy to "come-back".

A slew of mixed economic data stoked concerns that the economy's recovery is proceeding more slowly than hoped, as investors pulled back after the Dow Jones Industrial Average's recent rally. All but two of the blue-chip index components fell, and the Dow recently slid 80 points.Investors retreated from major market indexes after the Federal Reserve Bank of Philadelphia's business index dropped sharply, adding to unease over weak data reported earlier in the day. Producer prices fell for a third straight month in June, hurt by falling food and energy costs, although core prices remained tame.

U.S. weekly jobless claims fell to the lowest level in two years on Thursday due to temporary factors, while subdued inflation suggests the Federal Reserve will maintain its ultra-accommodative monetary policy for the foreseeable future.

The number of U.S. workers filing new claims for unemployment benefits fell last week by more than expected, as more manufacturers opted against the typical practice of shuttering factories for the summer. Claims declined 29,000 to 429,000 in the week ended July 10, the lowest level for claims since Aug. 23, 2008 - just as the financial crisis was nearing its height.

The drop was much bigger than market expectations for a 9,000 decline, though economists say the underlying trend in the jobs market won't become more clear until next month due to seasonal volatility.

"Although new claims are much lower than they were a year ago, they are still relatively high. This indicates that the pace of layoffs remains high and is not now falling noticeably," said Steven Wood, chief economist at Insight Economics.

New York area manufacturing activity expanded at a slower-than-expected pace in July, according to a survey from the Federal Reserve Bank of New York.

Overseas, the euro surged, hitting a two-month high against the U.S. dollar and breaking above $1.29. The euro was recently trading at $1.2915, up from $1.2738 late Wednesday in New York, boosted by the Spanish government's successful sale of $3.82 billion in 15-year bonds amid solid demand.

A cautionary note came from China, whose rate of growth cooled slightly. The country's second-quarter gross domestic product grew 10.3% over the same period a year earlier, slowing from the 11.9% annual growth recorded in the first quarter.

Treasurys

Prices of Treasury securities rose as a spate of U.S. data added to worries over the economic outlook and risks of deflation, fueling demand for safe assets. Long-dated securities led the rally. The bond market extended their price gains from a day earlier made after the release of the Federal Reserve's minutes for its June policy meeting, which showed policymakers downgraded their outlook on the economy and inflation.

Forex

The dollar continued it decline after U.S. data showed an economy inching forward, but raised concerns about the pace of the recovery. The euro rose above $1.29 for the first time in two months, while the greenback also declining to its lowest level since early May against a trade-weighted basket of its competitors. The mixed bag of U.S. data came on the heels of a Federal Reserve report that said U.S. economic growth was slowing.

The U.S. Dollar Index, which tracks the currency against a basket of six others, fell 1.1%. Demand for Treasurys increased, pushing yield on the 10-year note below 3%, to 2.99%. Crude-oil prices slid below $76 a barrel, while gold futures advanced.


European Stocks Slip On Recovery Worries

European stocks finished modestly lower Thursday as downbeat economic news from the U.S. raised concern about the pace of the recovery, offsetting strong earnings from J.P. Morgan Chase & Co. and receding fears about the euro-zone crisis.

Asian equities posted losses overnight following data showing a slight slowdown in China's second-quarter economic growth. Gross domestic product grew 10.3% over the year-earlier period, slowing from the 11.9% annual growth recorded in the first quarter.

Market participants retreated from equities after the U.S. Federal Reserve Bank of Philadelphia's business index dropped sharply, adding to unease over weak data released earlier. U.S. producer prices fell for a third straight month in June as the cost of food and energy declined. Manufacturing activity in the New York area expanded more slowly than expected in July, according to a survey from the Federal Reserve Bank of New York. Late in Europe, the Dow Jones Industrial Average was 0.7% lower at 10288.62.

Late in Europe, the euro was at $1.2913 from $1.2738 late in New York on Wednesday, while the dollar was at 87.51 yen from 88.28 yen. The Stoxx Europe 600 index ended down 1.2% to 252.97 after moving in and out of negative territory several times earlier in the session.

The Spanish Treasury sold EUR3 billion ($3.8 billion) of a 15-year government bond, the maximum it had intended. A French auction, held after Spain's, was also well received.

Argentina's June Industrial Production Jumps On Year.

Argentine industrial production again rose in June on the year as the economy continued to rebound from last year's recession.

Output rose 10.1% in June from the same month a year earlier, but fell 0.4% from May, the national statistics institute, Indec, reported Thursday. The figures were adjusted for seasonal effects.

Annualized production was up partly because of the comparison with the sharp decline in 2009, when output was curtailed by the global financial crisis.

The year-on-year figure came in above the 9.5% median growth forecast by economists surveyed by the Argentine Central Bank.