Online Consultancy Network Financial Journal: Stock Market Update

Market Update
Friday, August 20, 2010

Latest News Headline - US stocks pare most losses but set to post 2nd straight down week. US stocks declined further on Friday. At one point, the Dow dropped more than 100 points, as investors continued to worry about the strength of economic recovery after weaker than expected economic reports in the previous session. The US Dollar moved up Friday.

Dow Jones 10,213.62 -57.59 (-0.56%)
S&P 500 1,071.69 -3.94 (-0.37%)
Nasdaq 2,179.76 +0.81 (0.04%)

Market Summary:

Stocks:

The Dow Jones Industrial Average was down 57.59 points to 10,213.62, the S&P 500 closed down -3.94 points to 1,071.69 and the Nasdaq composite moved up +.81 to close at 2179.76.

The energy sector led the market lower Friday as U.S. stocks slid further in a week punctuated by disappointing economic data. Energy stocks led Friday's decline as crude-oil prices fell more than 1.4% to below $73.30 a barrel. Sterne Agee & Leach cut its stock-investment ratings on land drillers to "neutral" from "buy," citing rising service costs, among other factors. Nabors Industries fell 4.4%, while Patterson-UTI Energy fell 5.7% and Helmerich & Payne slid 4.4%.

Rising claims for initial jobless benefits, reported Thursday, along with the Philadelphia Federal Reserve's report of a sharp fall in economic activity in the mid-Atlantic region, are adding to pressure on oil prices.

Light trading in August has kept the market bouncing in a narrow range. After three hours of trading, less than 2 billion shares had traded hands in New York Stock Exchange Composite volume, on pace to fall below the daily average of 5.1 billion.

US stock futures pointed to a weaker open early Friday morning after stocks saw a steep selloff in the Asian Pacific and European markets and Thursday's decline. Futures for the Dow Jones Industrial Average were down by 107 points at 10,191 and were 62 points below fair value. S&P 500 futures were down by 5 points at 1066 and were 8 points below fair value, while futures for the Nasdaq were down by 10 points and were 13 points below fair value.

Crude Oil Price declines

Crude futures are falling Friday, as a higher dollar and lower equities add to a weaker outlook for the economic recovery. Crude-oil prices fell more than 1.4% to below $73.30 a barrel.

Precious Metals:

Gold futures declined Friday as a stronger dollar pressured prices, but the metal didn't fall far from the seven-week high it closed at a day earlier when it attracted haven-seeking buyers motivated by gloomy market sentiment.

The most-actively traded gold contract, for December delivery, recently was down $8.50, or 0.7%, at $1,226.90 an ounce on the Comex division of the New York Mercantile Exchang

Toronto Stocks Lower: Composite Index Down 0.8%

Share prices are lower in early trading Friday. Toronto's composite index is down 91.61 points, or 0.8%, to 11618.57, with declines leading advances by 5 to 4. Volume of 30.6 million shares after the first 15 minutes of the session is in line with Thursday's early volume of 31.9 million shares.

Canada C$1.6B Of 14-Day T-Bills Yield Average 0.445%

Canada's core inflation rate slows unexpectedly in July, falling 0.1% from June, while the headline rate accelerates on higher gas prices and changes in consumption taxes in Nova Scotia, Ontario and British Columbia.

South America:

Bank Of Mexico Sees US Slowdown As Risk To Mexican Exports. But reports that it sees a favorable consumption, and investment trends.

Gross Domestic Product (Year-On-Year):

2Q10 1Q10 4Q09 3Q09 2Q09 FY2009
Forecast +7.3% +3.8% -2.7% -6.8% -10.6% -
Actual +7.6% +4.3% -2.3% -6.1% -10.0% -6.5%

Mexico's stocks and the peso extended their losses early Friday as mounting worries about the strength of the U.S. recovery dented demand for Mexican assets due to the close economic ties between the two countries.

Mexico's economy expanded in the second quarter at its fastest pace in more than a decade as manufacturing continued to recover smartly from last year's recession and growth in services also gained momentum.

Gross domestic product, a measure of output of goods and services, grew 7.6% from the second quarter of 2009, the National Statistics Institute, or Inegi, said Friday. In seasonally adjusted terms, GDP expanded 3.22% from the first quarter, which translates into an annualized rate of 13.5%.

The increase in output from the second quarter of 2009 was bigger than the 7.3% median estimate in a Dow Jones Newswires survey of 15 economists, and the biggest year-on-year increase since early 1998 when Mexico was still recovering from the crisis of the mid-1990s.

Industrial production expanded 7.8%, led by manufacturing, while services rose 7.4% and agricultural production was 4.8% higher than a year ago.

Mexico's benchmark IPC index of most-traded issues was trading 0.3% lower at 32071 at 10:19 a.m. EDT. Volume was 10.4 million shares worth 261.8 million pesos ($20.5 million).

The peso came under additional selling pressure following the central bank's monetary policy statement, while Mexican government bonds continued to rally as investors sought the safe haven of sovereign debt.

The peso was quoted in Mexico City trading at MXN12.7685 to the U.S. dollar, after closing at MXN12.7060 on Thursday.

The yield on government bonds maturing in 2020 was off 10 basis points at 6.00%, while the yield on 2024 bonds was 11 basis points lower at 6.38%. Yields move inversely to bond prices.

Venezuela Oil Basket Falls $3.27 This Week To $67.56/Barrel

The average price for Venezuela's basket of crude oil and refined products fell by $3.27 to $67.56 a barrel during the week that ended Friday, the Oil Ministry said.

Venezuela's oil basket average for the year now stands at $69.75 a barrel, compared to $57.08 a barrel for all of last year and 2008's average of $86.49 a barrel.

European stocks decline

Germany's powerful economic growth in 2Q will prompt a considerable hike to the government's forecast for GDP growth across 2010, and growth continues at the start of 3Q, the finance ministry says.

The Greek government is preparing a series of new tax increases and spending cuts to comply with deficit limits set for 2011 by the International Monetary Fund and the European Union, writes Costas Paris and Nick Skrekas.

European stocks fall for third day on growth worries. Overseas on Friday, Hong Kong's Hang Seng slipped 0.4% higher and Japan's Nikkei fell 2%. The FTSE in London was losing 0.7%, and the DAX in Frankfurt was down by 0.9% Asian shares slide as Japan's growth stalls, FTSE slips as U.S. economy concerns hurt stocks, China trade surplus soars.

SPECIAL REPORT:

Massive Power Cut Hits Saint Petersburg - Reports

SAINT PETERSBURG Russia's second city Saint Petersburg was hit by a massive power cut Friday, affecting areas including the city centre as well as metro stations, reports said.

Lights went out on the city's famous Nevsky Prospekt, one of the longest city streets in the world, and trolleybuses halted in the middle of the road as the electricity cut.

The lights also went out in metro stations and delays for an unspecified period were being announced, the Interfax news agency and NTV television channel said.

The local news site Fontanka.ru said the local branch of the emergencies ministry had confirmed that almost all areas of the city had been left without electricity.

World markets Snapshot:

Shanghai 2,642.31 -45.67 (-1.70%)
Nikkei 225 9,179.38 -183.30 (-1.96%)
Hang Seng Index 20,981.82 -90.64 (-0.43%)
TSEC 7,927.31 -1.63 (-0.02%)
FTSE 100 5,182.55 -28.74 (-0.55%)
CAC 40 3,527.43 -44.97 (-1.26%)
S&P TSX 11,710.18 -70.90 (-0.60%)
S&P/ASX 200 4,430.90 -48.10 (-1.07%)
BSE Sensex 18,401.82 -53.12 (-0.29%)

Thursday, August 19, 2010 - Summary:

U.S. stocks skidded Thursday as weak economic data overshadowed excitement over the resurgence in deal activity, bringing the major benchmark indexes in the red for the week, month and year.

Stocks tumbled Thursday after two disappointing economic reports renewed investors' concerns about the pace of the recovery. The Labor Department said initial claims for unemployment benefits rose unexpectedly last week and the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region has dropped during August.

Dow Jones 10,271.21 -144.33
S&P 500 1,075.63 -18.53
Nasdaq 2,178.95 -36.75

Jobless claims jump to nine-month high

An unexpected surge in jobless claims startled investors, eclipsing Intel's announcement that it will acquire McAfee. "You've got what we think is a persistent unemployment rate that is unlikely to come down under 9% even next year," said Brad Thompson, managing director of Frost Investment Advisors.

For an economy trying to gain traction, the latest data just spilled a thick oil slick on the road ahead. Rising joblessness and falling orders are conditions for spinning wheels, not acceleration.

Thursday's data were uniformly disappointing and in contrast to the small improvement seen in the July data. If sustained, the trend will mean continued worries for financial markets. It will also increase pressure on Washington to do something--anything--to help.

For new jobless claims, "disappointing" is an understatement. New claims jumped 12,000 in the August 14 week to hit 500,000, the highest level since November 2009.

The four-week moving average rose to 474,000

Jill Brown, an economist at Credit Suisse, points out the latest moving average has risen by 26,000 since July's survey week. That's "the biggest increase since February 2009, when we were in the depths of the recession," Brown says.

"If leading indicators of unemployment continue to worsen, it raises the chances of a negative print [job losses] for private payrolls soon," she adds.

The August employment report is scheduled for release Sept. 3.

Germany Again Talks Tough On Fiscal Aid

The German chancellor and her central bank issued an uncomfortable reminder to financial markets Thursday that the euro zone's largest country hasn't finished looking for concessions from its partners as it tries to put itself and them back on the path to sound public finances.

"We have the joint belief that only sound finances can be a real basis for permanent, sustainable economic development," Angela Merkel said at a joint press conference with the visiting Czech Prime Minister Petr Necas, adding that "there is no very sensible alternative" to cutting budget deficits.

Meanwhile, the Deutsche Bundesbank warned that the emergency mechanisms set up to tackle the euro zone's sovereign debt crisis earlier this year shouldn't be made permanent, echoing comments from last month by Finance Minister Wolfgang Schaeuble.

Greece

Greece's deepening recession is driving joblessness steadily higher, feeding discontent with government austerity program and dragging on the broader economy.

The Greek economy contracted by 3.5% in the second quarter from a year ago, hitting retailers hard and sending unemployment rates to above 12% of the work force.

Forecasts vary. The International Monetary Fund sees the unemployment rate reaching 14.8% by 2012. But some labor experts fear that before long one in five Greek workers could be without jobs.

Their worry is that the coming end of the tourist season, a major strut for the Greek economy, looms as the next threat to Greece's struggle back to solvency and economic growth.

"We expect real unemployment to top one million workers by the year's end, which is a rate of 20%. We warned the government early on that their policy mix was flawed and would lead to this," said Stathis Anestis, the spokesman of the private-sector umbrella union GSEE.

Treasurys:

Treasurys rallied, led by the 30-year bond, as investors clamoured safe assets after the latest U.S. data in manufacturing and employment heightened fears of an economic slowdown. At the peak of the buying, the two-year note's yield hit a record low of 0.472% and the benchmark 10-year note's yield touched the lowest level since March 2009.

Forex:

The US Dollar Index found resistance at 83. Breakout would indicate that the correction is over, while respect would re-test support at 80. US Dollar Index NYBOT: DXY.NYB Futures Day's Range: 82.42 - 83.16, Now 83.05.

The euro was recently down 0.8% against the dollar, while U.S. equities, which continue to show a close correlation with crude futures, appear set to open lower. A stronger dollar makes crude more expensive in other currencies. The euro is testing the rising trendline; penetration would indicate that the recent rally has weakened, and reversal below $1.25 would indicate another test of primary support at $1.19.

Friday Currencies:

Euro - USD 1.2693 -0.0130 (-1.01%)
USD - JPY 85.2900 -0.0300 (-0.04%)
GBP - USD 1.5482 -0.0110 (-0.71%)
CAD - USD 0.9544 -0.0077 (-0.80%)
USD - HKD 7.7758 +0.0053 (0.07%)
USD - CNY 6.7902 +0.0005 (0.01%)
AUD - USD 0.8853 -0.0063 (-0.71%)

The dollar gained against the euro and most other higher-yielding currencies Thursday after deepening fears about the country's slow pace of recovery sent investors to traditional safe harbors. The greenback also managed to pare its earlier losses against the yen and Swiss franc by midday in New York. Major currencies shifted course several times during the global session as investors responded to data releases from different countries as well as a slump for U.S. equities.