Sentiment Evenly Poised as In-line Jobs Report May Weather Impact

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Although the U.S. stocks managed to hold above the unchanged linein early trading on Wednesday, they began a steady declinethroughout the reminder of the session to close significantlylower. The weakness stemmed from the caution exercised by tradersover the health of the labor market after a private survey showed asteep drop in jobs for June and a climb in oil prices.
The Dow Industrials declined 166.75 points or 1.46% to 11,216 andthe S&P 500 Index receded 23.39 points or 1.82% to 1,262, while theNasdaq Composite Index fell 53.51 points or 2.32% to 2,252. The Dowand Nasdaq are now down more than 20% from their October highs,suggesting that both the averages are now in "bear territory."
Among the sectors, the Dow Jones Transportation Average declined4.30% and the Amex Airline Index slumped 6.66%. Notwithstanding therise in the price of oil, the Amex Oil Index fell 3.24% compared toa 4.43% slide by the Philadelphia Oil Service Index. The Amex GoldBugs Index ended down 3.33%, while the Philadelphia Housing Indexslid 4.38%.
The Nasdaq Composite Index, which has been making lower highs andlower lows in its recent downtrend that began on July 6th, isinching closer to a support level around 2,227. If the downtrendcontinues, the index could descend down to its next support levelaround 2,168. On the upside, the targets are 2,330, 2,402, 2,444and 2,498.
On the economic front, the Commerce Department's factory goodsorders report showed a 0.6% increase in orders for manufacturedgoods in May following a 1.3% increase in April. Meanwhile, durablegoods orders rose marginally. Shipments of factory goods edged up0.1%, while unfilled orders and inventories climbed 0.9% and 0.5%,respectively.
Currency, Commodity Markets
Crude oil futures are trading up $1.50 at $145.07 a barrel afteradvancing $0.63 from Wednesday's closing price of $143.57 a barrel.Yesterday, the commodity climbed $2.60 a barrel after the U.S.Energy Information Administration released its weekly inventoryreport for the week ended June 27th that showed that crude oilinventories declined by 2 million barrels to 299.8 million barrels,and they are near the lower boundary of the average range for thistime of the year.
However, gasoline and distillate stockpiles increased by 2.1million barrels and 1.3 million barrels, respectively. Refinerycapacity utilization averaged 88.9% over the four weeks ended June27th compared to 89.1% in the previous week.
Meanwhile, gold futures are slipping $1 to $945.50 an ounce afterthe precious metal rose $2 to $946.50 an ounce on Wednesday.
On the currency front, the U.S. dollar is trading at 106.51 yen,stronger than the 105.911 yen it fetched at the close of New Yorktrading on Wednesday. The dollar is currently valued at $1.5804versus the euro.
Asia
Stock markets across the Asia-Pacific region closed mostly lowerThursday, led by India, as crude oil set fresh record highs,raising stagflation fears. Bucking the trend, China's Shanghaicomposite index gained nearly 2% and the Taiex ended slightlyhigher. The Japanese market closed lower for the eleventh straighttrading session, recording its longest losing streak in more thanhalf a century. After opening sharply lower, the market recoveredby late morning, but it ended slightly below the flat line ahead ofthe release of key U.S. jobs data and the European Central Bank'spolicy meeting.
The benchmark Nikkei 225 index lost 20.97 points or 0.16% to finishthe session at 13,265.40. The Nikkei has shed nearly 1,200 pointsor over 8% during the past 11 trading days, its longest losingstreak since late April 1954.
Among the major losers, Nippon Steel dropped 2.9% and JFE Holdingsfell 3.9%. Weakness in steel sector also hurt trading houses.Mitsubishi Corp plunged 4.4%, Mitsui & Co lost 3.6% and ItochuCorp. gave away 3.2%. Major exporters either trimmed or erasedearly losses. On the other hand, financial and oil firms rallied
The South Korean market closed lower, but off its early lows, withthe KOSPI falling to near its 2008 lows on stagflation fears. Themarket extended its losses for a sixth trading session.
The benchmark KOSPI index closed down 17.06 points or 1.1% at1,606.54 after falling below the 1,600 mark for the first time inalmost three months in early trading. The benchmark index hasdropped more than 6% during its six-day losing streak and is nowabout 15% below its 2008 best seen in mid-May.
Automakers fell after General Motors slumped overnight. HyundaiMotor tumbled 4.5% and Kia Motors fell 2.6%. Among the steelmakers, POSCO plunged 6.3% amid worries over costlier rawmaterials, including iron ore. Hyundai Steel dropped 5.3%. However,high-tech stocks rebounded following recent losses. SamsungElectronics gained 0.5% and Hynix jumped 5.5%.
The Chinese market extended its gains on Thursday, following abroad recovery among blue chips. The Shanghai Composite Indexgained 51.80 points or 1.95% to finish at 2,703.53. The marketended a four-day losing streak on Wednesday, recording a modestrecovery after the key index lost nearly 50% of its value so farthis year as the worst performing market in the world. Real estate,banking and metal sectors posted strong gains.
The Australian market fell to near two-year lows on concerns thatrecord oil prices would hurt global economic growth. The AllOrdinaries index closed down 117.6 points or 2.3% at 5,094.0.
On the economic front, the Australian Bureau of Statistics saidthat Australia's trade deficit was a seasonally adjusted A$965million in May, following a large upward revision to a A$12 millionsurplus in April. Economists expected a deficit of A$950 million inMay.
Europe
The major European markets are trading on a mixed note inThursday's session. The French CAC 40 Index is advancing 0.32%compared to a 0.09% drop by the German DAX Index, while the U.K.'sFTSE 100 Index is gaining about 0.11%.
Among the economic reports from across the Atlantic, the EuropeanUnion's statistical agency, the Eurostat, reported that the eurozone's retail sales rose 1.2% in May compared to the previousmonth. In the previous month, retail sales had declined by 0.6%. Ona year-over-year, basis, retail sales edged up 0.2% in May.
Meanwhile, the European Central Bank announced a 25 basis pointincrease in its main refinancing operations minimum bid rate to4.25%. The bank also raised its marginal lending facility anddeposit facility to 5.25% and 3.25%, respectively. Till last month,the central bank was in a hold mode since it raised interest ratesto 4% on June 7th, 2007. The inflation rate in the euro zone regionremains well above the central bank target of 2%, inspiring thecentral bank to be proactive despite the economic slowdown beingexperienced domestically and abroad.
U.S. Economic Reports
The Labor Department reported today that U.S. non-farm sector lost62,000 jobs in June compared to expectations for a decline of60,000 jobs. The U.S. economy has been losing jobs even since thebeginning of the year, triggering concerns over the health of thelabor market, even as the economy grapples with slowing growth.
The unemployment rate based on the household survey held steady at5.5%. Meanwhile, the average hourly earnings increased $0.06 or0.3% to $18.01.
Among the sectors, the good producing sector lost 69,000 jobs, withthe construction and manufacturing sectors losing 43,000 and 43,000jobs, respectively. Meanwhile, the services sector added 7,000jobs, as gains in education and health services, leisure andhospitality and government helped to offset the weakness in theprofessional and business services sectors.
A separate report from the Labor Department showed that joblessclaims rose to 404,000 in the week ended June 28th from theprevious week's revised figure of 388,000. Economists had beenexpecting jobless claims to edge up to 385,000 from the 384,000originally reported for the previous week.
The Labor Department also said that the less volatile four-weekmoving average jumped to 390,500 from the previous week's revisedaverage of 379,250. At the same time, the report also showed thatcontinuing claims in the week ended June 21st fell to 3.116 millionfrom the preceding week's revised level of 3.135 million.
The ISM is scheduled to release the results of itsnon-manufacturing survey at 10 AM ET on Thursday. Thenon-manufacturing index is likely to show a reading of 51 for June.
In May, the non-manufacturing index declined to 51.7 from 52 in theprevious month. Evidence of a build-up in inflationary pressuresincreased, as the price paid index showed a 4.9 point-increase to77. The production and the new orders index rose 2.7 points and 3.5points, respectively, while the exports orders index climbed to48.5 in May from 54 in April. On the flip side, the employmentindex fell below the cut-off mark of '50' to 48.7.