DJIA Inches Lower; Dimming Growth Prospects Overshadow Firm Jobs Data
BY DJ Realtime News Equity 12:20 PM ET 07/05/2012
--DJIA, S&P 500 fall as ECB, BOE, PBOC all boost stimulus
--Investors eye slowing economic growth that spurs moves
--ADP jobs report tops estimates; weekly jobless claims fall
--Growth in U.S. services-sector slows
By Chris Dieterich
NEW YORK--The Dow industrials inched lower in the face of central-central bank action, as investors focused on the economic weakness that spurred those moves.
Surprisingly strong jobs figures in the U.S. weren't enough to push blue chips higher, as the Dow Jones Industrial Average fell 23 points, or 0.1%, to 12920 on Thursday. The Standard & Poor's 500-stock index dropped four points, or 0.3%, to 1370, on pace to record its first decline in four sessions.
Major benchmarks pared declines in mid-morning trading, and the Nasdaq Composite reversed course and rose five points, or 0.2%, to 2981.
Financial stocks were the worst performing of the S&P 500's 10 sectors, as JPMorgan Chase fell 3.9% and Bank of America dropped 2%.
Consumer discretionary stocks were firmly higher after retailers reported June sales figures. Kohl's reported a bigger-than-expected drop in comparable-store sales, but shares jumped 7.3% after Chief Executive Kevin Mansell said he was " encouraged" by improved sales in the latter part of the month as the retailer built inventory. Ross Stores, Limited Brands and TJX all rose more than 3.5% after sales topped analysts' estimates.
Action from a trio of central banks greeted investors ahead of Thursday's opening bell. The European Central Bank lowered its benchmark lending rate, as expected. In addition, the Bank of England kept its key rate unchanged, but increased stimulus measures by boosting the size of its bond-buying program. China's central bank lowered interest rates for the second time in less than a month.
The central bank actions initially boosted U.S. stock futures and European markets, but enthusiasm faded quickly. Strategists suggested that many investors had likely already factored in the potential for rate cuts, particularly from the ECB. Others focused on the flagging economic growth that spurred central banks to action.
"We're in global-easing mode right now, trying to prop up markets," said Jeff Savage, regional chief investment officer for Wells Fargo Private Bank. "The bottom line is that we have weak economic numbers globally at the moment."
U.S. stocks softened despite two positive reports from the U.S. jobs market.
A report on private-sector job growth in June from Automatic Data Processing and consultancy Macroeconomic Advisors handily topped estimates, adding 176,000 jobs versus expectations for 108,000. The ADP report is seen as a preview to the closely watched government employment report due Friday.
Meanwhile, the number of U.S. workers filing for jobless benefits fell last week, indicating modest improvement in the sluggish labor market.
"I think that ECB rate change was well-anticipated very much priced in; the China move may have caught a few people off guard, and the ADP data were actually pretty strong," said Steve Sosnick, equity risk manager for Timber Hill LLC/ Interactive Brokers Group LLC. "The problem is that people are a little reluctant to speculate too heavily ahead of tomorrow's jobs report, and the market is taking a more wait-and-see approach on employment."
"It is a light day, the trading is thin," Mr. Sosnick said, adding "you can get some exaggerated moves if someone is trying to express a view or if news breaks, and the markets are likely to meander."
Additionally, the U.S. non-manufacturing sector-comprised mostly services- slowed more than expected in June, though employment prospects improved.
European markets were weaker, with the Stoxx Europe 600 falling 0.2%. Asian markets were mostly lower in action that took place before the central bank move. China's Shanghai Composite slumped 1.2% and Japan's Nikkei Stock Average lost 0.3%.
Crude-oil futures fell 0.4% to $87.30 a barrel, while gold futures declined 0.9% to $1,606 a troy ounce. The U.S. dollar rose against the euro and versus the yen. The yield on 10-year U.S. Treasury bonds fell to 1.588%.
In corporate news, OraSure Technologies surged 9.5% after the Food and Drug Administration approved the company's home HIV test that will be sold in retail stores.
Costco Wholesale fell 0.3% after the wholesale-club operator said June same- store sales rose 3% over year-earlier levels, missing the average analyst estimate of 3.7%, according to Thomson Reuters I/B/E/S.
Teen retailer Buckle slid 4.7% after the apparel and footwear retailer reported a 2.5% decline in June same-store sales compared with expectations that sales would be unchanged.
Fred's fell 3.7% after projecting fiscal second-quarter profit at the lower end of its outlook and as the regional discount retailer's same-store sales fell 4% during June, missing expectations.
Write to Chris Dieterich at christopher.dieterich@dowjones.com
(END) Dow Jones Newswires
07-05-12 1220ET
