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June starts ominously for teetering Wall Street...

On Wednesday June 1, 2011, 5:03 pm
By Ryan Vlastelica

NEW YORK (Reuters) - Wall Street ended a four-day rally with its worst session since August on Wednesday and could suffer more losses in coming days as investors faced more signs the economic recovery is fading.

All 10 Standard & Poor's sectors ended more than 1 percent lower and all 30 stocks in the Dow industrials fell. Banks were the biggest decliners as the economic reports painted a glum picture for jobs and manufacturing.

The recent four-day winning streak had some investors pointing to resilience in the market, but Wednesday's decline took the S&P through its 50-day moving average, leaving the market vulnerable to more losses.

"I expected that the S&P would be able to hold onto 1,331 or 1,324," said Roger Volz, director of cash equities at BGC Financial in New York. "The fact that we keep moving deeper into a corrective mode ... puts us on the sidelines for Friday."

In a sign of increased investor caution, the CBOE Volatility index (Chicago Options:^VIX - News) spiked 18.5 percent while in the U.S. options market became a bit more defensive. About 16.7 million contracts changed hands, with puts outpacing calls by a factor of 1.07:1, according to Trade Alert.

The Dow Jones industrial average (DJI:^DJI - News) was down 279.42 points, or 2.22 percent, at 12,290.37. The Standard & Poor's 500 Index (^SPX - News) was down 30.66 points, or 2.28 percent, at 1,314.54. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 66.11 points, or 2.33 percent, at 2,769.19.

The S&P financial sector (^GSPF - News) slumped 3.5 percent with JPMorgan Chase & Co (NYSE:JPM - News) and Bank of America Corp (NYSE:BAC - News) among the biggest drags. JPMorgan fell 3.4 percent to $41.75 while Bank of America lost 4.3 percent to $11.24. A number of hedge funds are selling the banking sector.

According to ADP, U.S. private employers added a scant 38,000 jobs in May, the lowest since September 2010 and far below what had been expected. Several banks cut their forecasts for Friday's non-farm payroll report from the Labor Department.

"The ADP number suggests that we'll see a weak payroll report on Friday, and it's very possible that soon people will be reducing their GDP forecasts," said Tim Speiss, head of personal wealth advisers at EisnerAmper in New York. "We could see some additional contraction."

Goldman Sachs cut its estimate, saying employers added 100,000 jobs in May versus an original estimate of 150,000. Citigroup cuts its forecast to 100,000 from 170,000.

Wall Street had a dismal start for June, a month that is historically weak for equities. It also ended May with the poorest monthly performance since August.

Manufacturing activity declined sharply in May, according to the Institute for Supply Management's index, which suffered its biggest fall since September 2009.

Wednesday's data was the latest in a string of discouraging reports on home sales, consumer confidence and Midwest business activity.

Automakers tumbled after reporting slightly lower car sales in May as economic weakness and high gas prices pushed consumers to delay purchases. General Motors Co (NYSE:GM - News) lost 5 percent to $30.23 and Ford Motor Co (NYSE:F - News) sank 4.6 percent to $14.23.

Almost five stocks fell for every one that rose on the New York Stock Exchange while on the Nasdaq about 81 percent of stocks finished in the negative.

About 8.36 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, slightly under last year's daily average of 8.47 billion. Recently, days of steep declines have corresponded with sharp upticks in trading volume.

DJIA Takes a Plunge, Losing 279.65 Points...
JUNE 1, 2011, 5:39 P.M. ET

NEW YORK—Stocks suffered their biggest declines since the middle of last year, as a slew of downbeat reports prompted fears the economic recovery is running out of steam.

The Dow Jones Industrial Average closed down 279.65 points, or 2.2%, to 12290.14, the biggest point drop since June 4, 2010.

Caterpillar dropped $4.56, or 4.3%, to $101.24, while Alcoa shares sank 72 cents, or 4.3%, to 16.09, and Bank of America fell 50 cents, or 4.3%, to 11.24.

All 30 of the blue-chip components finished in negative territory. The Dow, which snapped a four-day winning steak, dropped by more than 2% for only the second time this year.

Monday, May 23, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading down -12.20 points on heightened European sovereign-debt concerns. The US stock market last Friday closed lower on concern the European sovereign-debt crisis will worsen and after retailers sank when GAP cut its full-year profit forecast: Dow Jones -0.74%, S&P 500 -0.77%, Nasdaq Composite -0.71%.

                Bearish factors for stocks included (1) carry-over weakness from a decline in European stocks on concern the European debt crisis will worsen after Fitch Ratings cut Greece's credit rating one notch to B+ from BB+ and said the country could face a further reduction in its creditworthiness, and (2) a slump in retailers after GAP cut its full-year profit forecast because of higher costs and Aeropostale forecasted weaker-than-expected Q2 profits.

   Bullish factors included (1) data from the US Labor Department that showed payrolls grew in 42 states in Apr, while the unemployment rate fell in 39 states, which signals strength in the labor market, (2) comments from Dallas Fed President Fisher who said the recovery "is gathering steam" and that "underlying fundamentals" of the US economy are better than recent data may indicate, and (3) strength in energy producers after crude oil shook off early losses and moved higher.


•   United Continental (UAL) fell 3.2% in pre-market trading after Britain's weather agency warned that an ash plume from the Grimsvotn chamber, Iceland's most active volcano, could threaten trans-Atlantic air traffic with ash reaching the UK as early as tonight.


•   Alcoa (AA) slipped 1% in pre-market trading as industrial metals prices fell on demand concerns after a Chinese manufacturing index fell to a 10-month low.

Tuesday, May 24, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +3.20 points. The US stock market yesterday fell to 1-month lows and closed sharply lower on concern the European debt crisis may be getting worse along with concerns of a global economic slowdown after May Euro-Zone PMI manufacturing and May Chinese manufacturing activity weakened: Dow Jones -1.05%, S&P 500 -1.19%, Nasdaq Composite -1.58%.

                Bearish factors for stocks included (1) carry-over weakness from a slump in European stocks on concern the European sovereign-debt crisis may be getting worse after the yields on Greek and Irish 10-year government bonds rose to records and Standard & Poor's warned it may downgrade Italy's debt, (2) global growth concerns after the May Euro-Zone manufacturing PMI fell more than expected and the May China HSBC manufacturing PMI fell to its slowest pace of expansion in 10 months, (3) the weaker-than-expected Apr Chicago Fed National Activity Index which unexpectedly fell below zero to its lowest level in 8 months (-0.77 to -0.45 versus expectations of -0.06 to 0.20), and (4) weakness in energy and raw material producers as a rally in the dollar prompted a sell-off in most commodities.

   Bullish factors included (1) a strong earnings season thus far as 72% of the 455 companies in the S&P 500 that released results since Apr 11 have beaten per-share earnings estimates, and (2) the decline in the 10-year T-note yield to a 5-1/2 month low of 3.089%.


•   Freeport McMoRan (FCX) gained 1.2% in pre-market trading as the biggest publicly traded copper producer received a boost as copper prices climbed after Goldman Sachs said it's turning "more bullish" on raw materials.

Wednesday, May 25, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are tradingdown -2.10 points. The US stock market yesterday fluctuated on both sides of unchanged and closed slightly lower as a decline in financial stocks offset an unexpected increase in US new home sales: Dow Jones -0.20%, S&P 500 -0.08%, Nasdaq Composite -0.46%. The Nasdaq fell to a 1-month low.

                Bearish factors for stocks included (1) weakness in financial companies after Kansas City Fed President Hoenig said that banks' businesses should be confined to loans and deposits to avert a recurrence of Fed bailouts and the near-collapse of the financial system from 2008, (2) the unexpected decline in the May Richmond Fed manufacturing index which fell to a 2-year low (-16 to -6 versus expectations of unchanged at 10), and (3) the warning from St. Louis Fed President Bullard who said the intensification of Europe's debt crisis "is the top threat to the US economy today."

   Bullish factors included (1) the unexpected increase in Apr US new home sales (+7.3% to 323,000 versus expectations of unchanged at 300,000), (2) strength in energy and raw material producers after Goldman Sachs said it's turning "more bullish" on raw materials, and (3) a rally in for-profit schools after William Clair & Co. said that for-profit school stocks will trade higher within a year because the publication of a rule linking federal student aid to gainful employment will settle a controversy that has discouraged investment.


•   Applied Materials (AMAT) fell 3% in European trading after it forercast profit excluding certain costs for the current period will be 31 cents to 37 cents a share, below analysts' estimates of 38 cents.

Wall Street on Track for Fifth Down Week...
Reuters

Wall Street ends down as jobs data disappoints

On Friday June 3, 2011, 4:13 pm
NEW YORK (Reuters) - Wall Street closed out a fifth week of losses with more selling on Friday after a gloomy jobs report strengthened the case the economy was slowing, though analysts said indexes may finally stabilize in the near term.

Based on the latest available data, the Dow Jones industrial average (DJI:^DJI) fell 97.29 points, or 0.79 percent, to end unofficially at 12,151.26.

The Standard & Poor's 500 Index (^SPX) slid 12.78 points, or 0.97 percent, to finish unofficially at 1,300.16.

The Nasdaq Composite Index (Nasdaq:^IXIC) dropped 40.53 points, or 1.46 percent, to close unofficially at 2,732.78.

The S&P 500 posted its worst weekly decline since mid-August. For the week, each of the three major indexes was down 2.3 percent.

Thursday, May 26, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +2.10 points. The US stock market yesterday shook off early losses and finished higher as a rally in commodity producers and financial companies reversed losses triggered by a weaker-than-expected Apr durable goods report: Dow Jones +0.31%, S&P 500 +0.32%, Nasdaq Composite +0.55%. All of the indexes fell to 1-month lows but rebounded and finished higher.

                Bullish factors for stocks included (1) carry-over support from a late rally in European stocks as financial stocks moved higher after Fitch Ratings said it's not planning any downgrades of German banks because of Greece's debt crisis, (2) strength in commodity and energy producers after crude oil and metals rallied, and (3) the action by the OECD to raise is 2011 US GDP estimate to 2.6% from a Nov estimate of 2.2%.

   Bearish factors included (1) carry-over weakness from a decline in Asian stock markets after Apr Japan exports slumped -12.5% y/y, the largest decline in 1-1/2 years and a sign that global economic growth may be slowing, (2) the weaker-than-expected Apr US durable goods orders which posted their biggest decline in 6 months (-3.6% and -1.5% ex transportation versus expectations of -2.5% and +0.5% ex transportation), (3) comments from Treasury Secretary Geithner who said it will take "several more years" for a recovery in the US housing market, and (4) comments from ECB Council member Draghi who said he sees "serious downside risks" to economic growth from the European debt crisis.


•   NetApp (NTAP) rose 3% in pre-market trading after the company forecast Q1 adjusted earnings of 57 cents a share, higher than analysts' estimates of 50 cents.

Friday, May 27, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +1.00 point. The US stock market yesterday settled higher as a rally in raw material producers and technology stocks offset concern the US economic recovery may be losing momentum after Q1 US GDP expanded less than expected and weekly initial jobless claims unexpectedly rose: Dow Jones +0.07%, S&P 500 +0.40%, Nasdaq Composite +0.78%.

                Bullish factors for stocks included (1) strength in raw material producers as a weak dollar prompted a broad-based rally in commodities, (2) a rally in Microsoft, which led technology stocks higher, after Gamco Investors said shares of the world's biggest software maker are "statitistically" cheap, and (3) reduced interest rate concerns after the 10-year T-note yield fell to a 5-1/2 month low of 3.06%.

   Bearish factors included (1) the weaker-than-expected Q1 US GDP (unrevised at +1.8% annualized, weaker than expectations for an upward revision to +2.2% annualized), as Q1 personal consumption was unexpectedly revised down to +2.2% from the originally reported +2.8%, (2) the unexpected increase in weekly US initial unemployment claims (+10,000 to 424,000 versus expectations of -5,000 to 404,000), and (3) carry-over weakness from a decline in European stocks on concern that Europe's debt crisis may worsen after the head of the European finance ministers, Jean-Claude Juncker, said the IMF may not release its portion of aid to Greece next month.


•   Marvell Technology Group (MRVL) rallied 8.9% in pre-market trading after the company forecast Q2 profit of 35 cents to 39 cents a share, stronger than analysts' estimates of 33 cents.

Tuesday, May 31, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +12.30 points on Greek aid optimism. The US stock market last Friday moved higher after G-8 leaders said the global economy is strengthening along with an unexpected increase in US consumer confidence: Dow Jones +0.31%, S&P 500 +0.41%, Nasdaq Composite +0.50%.

                Bullish factors for stocks included (1) the statement from G-8 leaders meeting in France that "the global recovery is gaining strength and is becoming more self-sustained," which will pave the way for reductions in debt, (2) the unexpected increase in May US University of Michigan consumer confidence (+1.9 to 74.3 versus expectations of unchanged at 72.4), and (3) a rally in financial stocks on reduced European debt concerns after ECB Council member Wellink said he's "fully confident" Greece will meet conditions to receive its 3.3 billion-euro ($4.7 billion) aid payment by the IMF next month.

   Bearish factors included (1) the weaker-than-expected Apr US personal spending (+0.4% versus expectations of +0.5%), and (2) the plunge in Apr US pending home sales (-11.6% m/m versus expectations of -1.0% m/m).


•   Goldman Sachs (GS) climbed 1.0% in pre-market trading after JPMorgan Chase upgraded the stock to "overweight" from "neutral."


•   Alcoa (AA) rose 1.3% in pre-market trading after industrial metals prices rose in overnight trade, with copper climbing to a 3-week high.

Wednesday, June 1, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading down -1.60 points. The US stock market yesterday strengthened throughout the day and settled sharply higher on speculation the European Union will provide additional aid for Greece: Dow Jones +1.03%, S&P 500 +1.06%, Nasdaq Composite +1.37%. The S&P 500 and the Dow posted 1-week highs while the Nasdaq climbed to a 2-week high.

                Bullish factors for stocks included (1) a rally in financial companies on carry-over strength from a rally in European bank stocks on speculation European leaders will provide sufficient aid to help Greece avoid default on its debt after Jean-Claude Juncker, leader of the Euro-Zone finance ministers, said EU leaders will decide on a new aid package for Greece by the end of June and that EU officials have ruled out a "total restructuring" of Greece's debt, (2) gains in energy and raw-material producers as dollar weakness prompted a broad-based rally in most commodities, and (3) reduced i nterest rate concerns after the yield on the 10-year T-note fell to a 5-3/4 month low of 3.04%.

   Bearish factors included (1) the weaker-than-expected Mar S&P/CaseShiller composite-20 home price index which fell -3.6% y/y, weaker than expectations of -3.4% y/y and the biggest annual decline in 16 months, (2) the unexpected drop in May US consumer confidence which tumbled to a 6-month low (-5.2 to 60.8 versus expectations of +1.1 to 66.5), and (3) the greater-than-expected drop in the May Chicago purchasing managers index which expanded at its slowest pace in 1-1/2 years (-11.0 to 56.6 versus expectations of -5.3 to 62.3).

Thursday, June 2, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +3.40 points. The US stock market yesterday fell sharply as slower than expected job growth along with weakness in manufacturing activity fueled concern that the economy is faltering: Dow Jones -2.22%, S&P 500 -2.28%, Nasdaq Composite -2.33%. The Dow fell to a 1-1/4 month low.

                Bearish factors for stocks included (1) the smaller-than-expected increase in the May ADP employment change which posted its smallest job gain in 8 months (+38,000 versus expectations of +175,000), (2) the sharper-than-expected decline in the May ISM manufacturing index which expanded at its slowest pace in 20-months (-6.9 to 53.5 versus expectations of -2.9 to 57.5), (3) the action by Moody's Investors Service to cut Greece's local and foreign currency bond ratings to Caa1 from B1 with a negative outlook, and said there's a growing risk that Greece will default on its debt, and (4) concern that economic growth is slowing globally as well after t he May Euro-Zone manufacturing PMI was unexpectedly revised down to a 7-month low (-0.2 to 54.6), the May UK PMI manufacturing slipped to a 1-1/2 year low (-2.3 to 52.1), and China's May PMI manufacturing expanded at its slowest pace in 9 months (-0.9 to 52.0).

   Bullish factors included (1) reduced inflation concerns after the larger-than-expected decline in the May ISM prices-paid sub-index (-9.0 to 76.5 versus expectations of -3.7 to 81., (2) comments from Cleveland Fed President Pianalto who said she "expects the economy to continue on a gradual recovery pace over the next few years, with annual growth just above 3% a year," and (3) reduced interest rate concerns after the yield on the 10-year T-note fell to a 5-3/4 month low of 2.95%.


•   Joy Global (JOYG) jumped 3.4% in pre-market trading after the company raised its earnings estimates for this year to $5.30 to $5.60 a share, up from an earlier estimate of $5.10 to $5.40 as orders increased.

Friday, June 3, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are tradingdown -3.90 points ahead of May US nonfarm payrolls. The US stock market yesterday settled mixed as concern the economy is slowing weighed on prices: Dow Jones -0.34%, S&P 500 -0.12%, Nasdaq Composite +0.15%. The Dow and S&P 500 fell to 1-1/2 month lows while the Nasdaq slipped to a 1-week low.

                Bearish factors for stocks included (1) the smaller-than-expected drop in weekly initial unemployment claims (-6,000 to 422,000 versus expectations -7,000 to 417,000), (2) the larger than expected decline in Apr factory orders which posted their largest monthly drop in 11 months (-1.2% versus expectations of -1.0%), (3) weakness in financial stocks after Moody's Investors Service placed the deposit, senior debt and senior subordinated debt ratings of Bank of America, Citigroup and Wells Fargo and their subsidiaries on review for possible downgrade, and (4) the sell-off in retailers after May sales trailed analysts' estimates amid rising prices and soaring gasoline costs.

   Bullish factors included (1) reduced concerns over the European debt crisis after German Chancellor Merkel said the European Union remains committed to the euro and the outlook for German growth is "very positive," and (2) a rally in for-profit colleges after the US Education Department gave the industry more time to comply with rules that will cut off federal aid to institutions whose students struggle the most to repay their government loans.

Monday, June 6, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading down -2.50 points. The US stock market last Friday plunged early on the weaker-than-expected May US nonfarm payrolls but recovered some of its losses and closed moderately lower on speculation Greece will secure a second financial rescue: Dow Jones -0.79%, S&P 500 -0.97%, Nasdaq Composite -1.46%. The Dow and S&P 500 fell to 1-1/2 month lows while the Nasdaq slipped to a 1-week low.

                Bearish factors for stocks included (1) concern that a weak job market will hurt consumer confidence and spending after the smaller-than-expected increase in May nonfarm payrolls which posted their smallest gain in 8 months (+54,000 versus expectations of +170,000), (2) the unexpected drop in May manufacturing payrolls which posted their first decline in 7 months (-5,000 versus expectations of +10,000), and (3) the unexpected increase in the May unemployment rate (+0.1 to 9.1% versus expectations of -0.1 to 8.9%).

   Bullish factors included (1) reduced concerns over the European debt crisis after Jean-Claude Juncker, head of the Euro-Zone finance ministers, said the EU will approve additional financing to Greece, (2) the larger-than-expected increase in the May ISM non-manufacturing index (+1.8 to 54.6 versus expectations of +1.2 to 54.0), and (3) the decline in the 10-year T-note yield to a 5-3/4 month low of 2.95%.


•   Walt Disney (DIS) slipped 1.0% in pre-market trading after a federal judge refused to grant the media company an injuction against Dish Network to stop them from giving its subscribers free access to Disney's movies.

Tuesday, June 7, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +6.50 points. The US stock market yesterday settled modestly lower on weakness in bank stocks along with growing concern that economic growth continues to slow: Dow Jones -0.50%, S&P 500 -1.08%, Nasdaq Composite -1.11%. The Dow and S&P 500 fell to 2-1/4 month lows while the Nasdaq posted a 1-1/2 month low.

                Bearish factors for stocks included (1) weakness in bank stocks led by Wells Fargo which declined after well-known bank analyst Bove cut his recommendation on the bank to "sell" from "neutral," citing a poor economic environment. weak housing prices, slowing manufacturing indicators and a negative regulatory environment, and (2) interest rate concerns after Philadelphia Fed President Plosser said an exit from stimulus measures should start "long before" a recovery in the US jobs market is assured.

   Bullish factors included (1) speculation that fund managers may begin to scoop up cheaply priced US stocks on valuation after the S&P 500 fell to 12.4 times its companies' estimated operating earnings, its cheapest valuation in 9 months, and (2) strength in mining stocks and metal producers as the price of gold rallied to a 1-month high and after Goldman Sachs reiterated its "buy" recommendation on Freeport-McMoRan Copper & Gold.


•   International Paper (IP) climbed 2.7% in pre-market trading after the world's largest pulp-and-paper maker made a $3.31 billion hostile takeover bid for rival Temple-Inland Inc.

Dow Jones Industrial Average...

The Dow is undergoing a correction, headed for the long-term trendline below 12000. Bearish divergence on 21-day Twiggs Money Flow continues to warn of selling pressure. Primary support remains at 11600.

* Target calculation: 12400 + ( 12400 - 11600 ) = 13200