Market Update 080606 http://biz.yahoo.com/mu/update.html 4:25 pm : Unless you were long oil futures, there was nothing pretty about Friday's session, which was governed by a relatively disappointing employment report for May and a stunning rise in oil prices.
According to the Bureau of Labor Statistics, nonfarm payrolls declined by 49,000 positions in May, hourly earnings rose 0.3% and the average workweek held steady at 33.7 hours. These numbers, however, weren't the problem for the market. An unemployment rate that jumped to 5.5% from 5.0% was.
Careful examination of the data revealed that the jump in the unemployment rate was not a reflection of lower employment levels (or an indication that the nonfarm payroll data are misleading). It was due either to a large number of people re-entering the labor force and being counted as unemployed, or to a one-month aberrant swing in the data. Our bet would be on a combination of the two.
Notwithstanding this interpretation, the jump in the jobless rate is certain to weigh on consumer sentiment and the stock market didn't like the thought of that as it relates to consumer spending behavior. That consideration got Friday's trade started on a negative note, but it wasn't long before the employment report took a backseat to oil prices and another unsettling outing by the financial sector.
Crude futures set records on two fronts today. First, the $10.75 increase in prices marked the largest, single-day price gain ever, eclipsing the prior record which stood for all of 24 hours. Secondly, oil prices closed at a new record high of $138.54 per barrel, eclipsing the prior record of $133.17 reached May 21.
The spike in prices was a response to a dollar that weakened following the employment report, saber-rattling in Israel toward Iran, and a view from Morgan Stanley that oil prices could hit $150 -- by July 4!
In the face of this oil price spike, equity investors found little incentive to step up and buy on the weakness.
The energy sector spent a good bit of its time in positive territory today, but even it succumbed to selling pressure late in the session that culminated in all ten economic sectors recording a loss and the S&P 500 falling 3.1%.
Hard hit were oil-sensitive groups, such as the transports and the retailers. There just wasn't any leadership. For some perspective, the energy sector, which declined 1.6%, was the best-performing sector today. All other sectors dropped at least 2.0%, yet none fell more than the financial sector, which declined 5.0%.
Weakness in the financials was driven by a Wall Street Journal report that the SEC is investigating Dow component AIG (AIG 33.93, -2.48) for its swaps accounting and growing concerns about rising consumer loan defaults that hit the bank stocks extra hard.
The retreat in the equity market and the jump in the unemployment rate drove a healthy bid at the back end of the Treasury yield curve. The yield on the benchmark 10-year note, which hit 4.04% Thursday, closed the week at 3.93%.
The S&P 500 was up 0.3% for the week entering Friday's session, but with the drubbing on Friday, it ended the week down 2.8%.DJ30 -394.64 NASDAQ -75.38 NQ100 -3.2% R2K -3.0% SP400 -2.6% SP500 -43.37 NASDAQ Dec/Adv/Vol 2343/548/2.20 bln NYSE Dec/Adv/Vol 2584/562/1.44 bln
3:25 pm : At the moment, it's setting up to be a clean sweep with all 10 economic sectors registering a loss. Even the energy sector (-0.3%) has slipped back into negative territory as the spike in crude prices has resuscitated worries about demand destruction.
Separately, there hasn't been anything today that can seemingly resuscitate the financial sector. It is down 4.1% and on the brink of registering a 20% loss for the year.DJ30 -346.60 NASDAQ -61.82 SP500 -34.94 NASDAQ Dec/Adv/Vol 2261/595/1.69 bln NYSE Dec/Adv/Vol 2508/618/995 mln
3:00 pm : It's more of the same for the stock market, which can't seem to escape the sight of record high oil prices nor the recognition of how quickly the latest price spike unfolded.
The major indices are all down 2.0% or more.
The S&P 500 for its part is down 2.2% for the week, which is a move that fits with a volatile trading pattern. In the last five weeks, beginning with last week, the S&P has been: +1.8%, -3.5%, +2.7%, -1.8% and +1.2%.DJ30 -336.10 NASDAQ -65.60 SP500 -33.96 NASDAQ Dec/Adv/Vol 2257/587/1.55 bln NYSE Dec/Adv/Vol 2470/639/915 mln
2:30 pm : The major indices all broke to new lows in the past half-hour with oil prices challenging, and then conquering, the mark of a $10 increase in a single session.
Today's move has shattered the record set yesterday of the biggest, single day move in oil prices. Oil is currently up $11.13 in a fast market at $138.95.
There is a large swath of red on stock monitors today, with gold and oil-related stocks among the handful of winners whose prices are distinguished with green print.DJ30 -340.17 NASDAQ -66.51 SP500 -34.00 NASDAQ Dec/Adv/Vol 2214/612/1.38 bln NYSE Dec/Adv/Vol 2437/658/817 mln
2:00 pm : The market is fixated on oil today and understandably so. Crude futures have soared to record highs, having gained 13% between their low yesterday and their high today.
With the remarkable price action today, stock market participants haven't seen much point thus far in trying to buy on today's weakness.
While the spike in oil prices is weighing heavily on the broader market, it's having a pronounced impact on the Dow Jones Transportation Average today, which is down 3.2%. The financial sector, though, still carries the label of being the worst-performing in today's session with a current decline of 3.7%.DJ30 -284.73 NASDAQ -50.67 SP500 -26.99 NASDAQ Dec/Adv/Vol 2185/623/1.25 bln NYSE Dec/Adv/Vol 2408/666/736 mln
1:30 pm : The stock market continues to struggle as oil prices continue to rise. In the past half-hour, crude futures took another leg higher, clearing their all-time high of $135.09 and running to $137.70, up $9.91, or 7.8%.
Prices have since cooled some, but the latest move has put traders on alert for a "limit up" stoppage of trade.
According to NYMEX, the crude limit is $10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction.
Presently, oil is trading up $8.88 at $136.64.DJ30 -288.96 NASDAQ -49.71 SP500 -49.76 NASDAQ Dec/Adv/Vol 2192/606/1.15 bln NYSE Dec/Adv/Vol 2410/643/669 mln
12:55 pm : With a retest of today's lows having been met with some support, there has been a slight pickup in buying efforts (emphasis on the word 'slight').
In the past half-hour the energy sector, up 0.2%, has climbed back to positive territory while the remaining sectors have simply worked off a modicum of their losses.
Crude oil continues to play the role of spoiler, though. At $134.44, it is sitting close to its highs for the day. Where it goes from here will most likely play an influential role in where the major indices go in afternoon trading.DJ30 -271.13 NASDAQ -42.27 SP500 -24.86 NASDAQ Dec/Adv/Vol 2104/658/1.02 bln NYSE Dec/Adv/Vol 2397/615/599 mln
12:30 pm : The indices continue to trade near their lows for the session as buyers have found little incentive to step up to this point.
On a comparative basis, the S&P 400 Midcap Index is faring the best among the major averages. Currently, it is down 1.6% versus a 1.9% drop for the S&P 500.
This relative strength isn't anything new for the Midcap Index this year. Aided by the support from many of its energy-related components, it is up 2.9% year-to-date versus a 6.2% decline for the S&P 500, a 7.1% loss for the Dow and a 5.5% decline for the Nasdaq.DJ30 -278.37 NASDAQ -43.50 SP500 -26.15 NASDAQ Dec/Adv/Vol 2125/605/932 mln NYSE Dec/Adv/Vol 2409/594/547 mln
12:00 pm : We noted yesterday in our wrap-up of the day's bullish action that stock market sentiment changes in a hurry these days and that the May employment report would be the next test of sentiment.
The market looks to have failed that test, although a relatively disappointing employment report is a distant second to the primary cause of failure, which is an astounding spike in crude prices.
Briefly, the Bureau of Labor Statistics reported a 49,000 decline in nonfarm payrolls in May (consensus -60K), a 0.3% increase in hourly earnings and an average workweek that held steady from the prior month at 33.7 hours.
The headline that rattled investors, though, was the unemployment rate popping to 5.5% from 5.0%. Careful examination of the data reveals, however, that the jump in the unemployment rate is not a reflection of lower employment levels (or an indication that the nonfarm payroll data are misleading). It is due either to a large number of people re-entering the labor force and being counted as unemployed, or to a one-month aberrant swing in the data. Our bet would be on a combination of the two.
Notwithstanding this interpretation, the jump in the jobless rate is certain to weigh on consumer sentiment and the stock market doesn't like the thought of that as it potentially relates to consumer spending behavior. Accordingly, the consumer discretionary sector, down 2.6%, has been hit hard in Friday's trade.
Losses in the consumer discretionary sector have been exacerbated by the 5.1% increase in oil prices to $134.30 per barrel that has been driven by a weakening dollar, geopolitical concerns, and a view from Morgan Stanley that prices could hit $150 by July 4.
It is the move in oil that has had the biggest effect on trading, as the indices have been languishing at noticeably lower levels throughout the morning while oil prices have been holding near their high, which is within close proximity of the all-time high of $135.09 reached on May 22.
An added weight on the broader market has been the poor showing from the financial sector, which is down 3.1% on broad-based selling pressure. A Wall Street Journal report that the SEC is investigating the swaps accounting by AIG (AIG 34.11, -2.30) and growing worries about consumer loan defaults have been the main forces behind today's selling in the volatile financial sector.
At this point, all ten economic sectors are in negative territory; meanwhile, the Treasury market is benefiting from some safe-haven trading that has seen the yield on the 10-year note fall to 3.94% from 4.04% yesterday.DJ30 -264.13 NASDAQ -43.00 SP500 -24.94 NASDAQ Dec/Adv/Vol 2139/578/827 mln NYSE Dec/Adv/Vol 2401/569/486 mln
11:30 am : The major indices moved to new session lows as oil prices pushed back to their highs for the day.
Currently, oil is up $6.59, or 5.1%, to $134.37. The move puts the commodity less than a buck away from the all-time high of $135.09 reached on May 22.
Yesterday oil prices hit $121 and change. Arguably, the velocity of the rebound bid has been as bothersome to the stock market as the actual price of oil itself.DJ30 -272.37 NASDAQ -44.71 SP500 -25.40 NASDAQ Dec/Adv/Vol 2084/596/675 mln NYSE Dec/Adv/Vol 2331/591/385 mln
11:00 am : On Thursday the bulls controlled the market. Today it is the bears who have command of the trading action, as evidenced by an advance-decline line at the NYSE that favors decliners by a 4-to-1 ratio and nine out of ten economic sectors sporting a loss in excess of 1.0%.
Similarly, 29 of 30 Dow components are down for the day. The lone winner is Chevron (CVX 100.42, +0.43), which is garnering support from the spike in crude prices.
Separately, the May employment report has prompted some buying at the back end of the Treasury yield curve, as the jump in the jobless rate will presumably help curtail wage hike demands which, in turn, should help keep inflation pressures in check. The 10-year note is up 16 ticks with its yield at 3.98%.DJ30 -217.39 NASDAQ -36.11 SP500 -20.63 NASDAQ Dec/Adv/Vol 2019/562/520 mln NYSE Dec/Adv/Vol 2286/575/296 mln
10:30 am : What a difference a day makes. Yesterday the Dow gained 214 points. Today it has essentially given back the entirety of that gain as the market sells off in the face of rising oil prices and a relatively disappointing employment report for May.
Outside of the energy sector, there isn't any leadership from a sector standpoint. Eight of the nine remaining sectors in negative territory are down more than 1.0%. The volatile financial sector leads the pack with a decline of 2.7%.
Weakness in AIG (AIG 34.42, -1.99), which The Wall Street Journal said was being investigated by the SEC for its swaps accounting, and broad-based weakness across the banking stocks, which are down on loan default concerns, has served as the main source of weakness for the financials.DJ30 -220.32 NASDAQ -35.01 SP500 -19.97 NASDAQ Dec/Adv/Vol 1964/523/372 mln NYSE Dec/Adv/Vol 2240/549/199 mln
10:00 am : A spike in oil prices has been the biggest weight on the market this morning. Currently, they are up 5.0% at $134.20, but remarkably, they are up 10% from yesterday's low.
A weaker dollar, geopolitical concerns, and Morgan Stanley's view that prices could hit $150 by July 4 are all contributing to the spike. Not surprisingly, the top performers list for the S&P 500 is littered with oil-related industry groups.
The dollar index had been trading higher earlier, but reversed in the wake of an employment report that led many traders to conclude the Fed won't be raising interest rates soon. The pullback has been a source of support for gold prices, too, which are up 2.1% to $893.60/oz.DJ30 -168.29 NASDAQ -26.05 SP500 -12.34 NASDAQ Dec/Adv/Vol 1709/608/162 mln NYSE Dec/Adv/Vol 1976/519/69 mln
09:40 am : The stock market is down sharply in the early-going, with yesterday's rally getting beaten back by bothersome headlines related to the May unemployment rate, which jumped to 5.5% from 5.0%, and oil prices, which are up 5.5% to $134.38, after Morgan Stanley said oil prices could hit $150 - by July 4!
Together, the jump in the jobless rate and the spike in oil prices are feeding concerns about a consumer spending retrenchment. Fittingly, the consumer discretionary sector, down 1.8%, is among the biggest laggards at this juncture.
Only one sector - energy (+2.1%) - is trading higher right now.DJ30 -151.44 NASDAQ -28.23 SP500 -12.76
09:17 am : S&P futures vs fair value: -9.3. Nasdaq futures vs fair value: -12.5.
09:05 am : S&P futures vs fair value: -8.5. Nasdaq futures vs fair value: -11.2. The futures market has been beaten back on the employment report and is signaling a lower start for stocks when trading begins. Rising oil prices, up 2.7% to $131.40, are acting as another buying deterrent.
08:39 am : S&P futures vs fair value: -8.2. Nasdaq futures vs fair value: -13.2. The futures market takes a dip in response to the May employment report, which contained the unsettling headline showing the unemployment rate jumped to 5.5% from 5.0%. Nonfarm payrolls were down 49K, which was a bit ahead of the consensus estimate that called for a 60K decline. Hourly earnings rose 0.3%, above the view that they would be up 0.2%.
08:24 am : S&P futures vs fair value: +0.2. Nasdaq futures vs fair value: +3.5. The broader market is indicated to open roughly flat, but that is ahead of the jobs report which is due shortly and carries market-moving sway.
07:58 am : S&P futures vs fair value: +0.2. Nasdaq futures vs fair value: -2.8. There isn't much conviction in the futures trade at this juncture as the market awaits the release of the May employment report at 8:30 AM ET. Economists expect a decline of 60K in nonfarm payrolls, which would be the fifth straight monthly decline. The unemployment rate is expected to tick up to 5.1% from 5.0%, hourly earnings are anticipated to be up 0.2%, and the average workweek is expected to have held steady at 33.7 hours.
06:22 am : S&P futures vs fair value: -0.9. Nasdaq futures vs fair value: -2.3.
06:22 am : FTSE...6024.30...+29.00...+0.5%. DAX...6937.76...-4.07...-0.1%.
06:22 am : Nikkei...14489.44...+148.32...+1.0%. Hang Seng...24402.18...+146.89...+0.6%.
My posting is for my own entertainment, do your own DD before pushing your buy/call button
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