Can stocks get past weak jobs report?

Stocks finish the week lower, with the Dow off 46. Investors must ponder what to do next over a long weekend. Tuesday could be volatile. Private job creation is less than expected. Apple concedes an iPhone software glitch.

By Charley Blaine Jul 2, 2010 10:45AM
Charley BlaineUpdated: 8:20 p.m. ET

Stocks ended Friday lower after the Labor Department reported that private-sector job creation remained weak in June and a report showed factory orders declined more than expected.

Traders now face a long weekend to decide if the market hit a bottom during the day or whether there's more pain ahead for investors. U.S. financial markets will be closed Monday for Independence Day.

The Dow Jones industrials ($INDU) closed down 46 points on the day to 9,686, their seventh straight loss and longest losing streak since October 2008.

The Standard & Poor's 500 Index ($INX) closed down 5 points to 1,023, and the Nasdaq Composite Index ($COMPX) was off 10 points to 2,092. 

It wasn't clear what turned the market around. Short-covering was probably at work, as were computerized trading orders.

Next week features only a few earnings reports and no economic reports of importance. So, the week's trading may offer a sense of whether the market's low on Friday is important. The key to the week will be Tuesday when traders come back from the long weekend.

The Dow bottomed on the day at 9,614, down 118 points, at about 1 p.m. The blue-chips briefly recovered all of that gain and briefly moved into the black before sliding back right on the close.

Also at 1 p.m., the S&P 500 hit 1,016, down 11 points, and recovered all of that loss before a late slide.

The market faces four big challenges
Those who argue Friday's low was a bottom may be arguing as a matter of faith or in the belief that stocks are so low they're ready for a big ride higher. There are four big headwinds facing them.

The terrible economic data. Friday's jobs report and a report on factory orders were two more piece of evidence of an economy that is slowing down. How nasty a slowdown is not yet clear.

Ultra-low interest rates may be signaling big deflationary pressures. So, investors unwilling to commit little -- if any -- capital to stocks for now.

The market chart is dangerous. The head-and-shoulders pattern that the major averages have been tracing of late is still in place, and it's powerful. Plus, the S&P 500's 50-day moving average fell under its 200-day moving average on Friday. That a signal the market may fall some more.

Fewer than 20 stocks in the S&P 500 are trading above their 50-day moving averages, according to Bespoke Investment Group. When the market bottomed in March 2009, 5% of the S&P 500 was trading above their 50-day moving averages.

A weak labor picture that nobody likes

The market's day of drama came as the Labor Department said 83,000 private-sector jobs were created. The consensus estimate had been for 110,000.

President Barack Obama said the economy is improving, though not as fast as he would like.

At the same time, the economy shed 125,000 nonfarm jobs, the first decline in six months. But 225,000 people who had lost their jobs had been let go by the Census Bureau. The U.S. unemployment rate fell from 9.7% to 9.5%. That reflected a decline in the number of people seeking jobs.

Private job growth was the focus of this employment report because it was expected that the decline in Census Bureau jobs would be so large.

Private-sector jobs have risen every month this year and are up 593,000 since December. But that growth slowed to a trickle in May, as the economy created just 33,000 jobs that month.

The  jobs report suggested it will take years for the economy to recover the 8-million-plus jobs lost since the recession began in December 2007.

Meanwhile, the Commerce Department said factory orders fell 1.4% in May after eight straight monthly increases. Economists had expected a 0.8% decline. Declines in transportation equipment orders were the biggest issue. Boeing (BA) is the biggest contributor to this category, and orders for new jets have fallen.

The recession was caused in part by the financial market crash of 2008, the massive decline in basic industries such as steel and auto manufacturing, and by the exporting of millions of jobs overseas by employers seeking lower employment costs.

Markets for the week



7/2/2010

6/25/2010

% chg.

YTD chg.
Dow industrials

9,686.48

10,143.81

-4.5%

-7.1%
S&P 500

1,022.58

1,076.76

-5.0%

-8.3%
Nasdaq 

2,091.79

2,223.48

-5.9%

-7.8%
Russell 2000

598.97

645.11

-7.2%

-4.2%
Crude oil 

$72.14

$78.86

-8.5%

-9.1%
(per barrel)











U.S. Dollar Index 

84.67

85.57

-1.05%

8.25%
10-yr. Treasury

2.98%

3.11%

-4.3%

-22.5%
Gold

$1,207.70

$1,256.20

-3.9%

10.2%
(per troy ounce)












A struggle for stocks
Only four of the 30 Dow stocks were higher: Verizon Communications (VZ), up 1.8% to $26.81; Microsoft (MSFT),  up 0.5% to $23.27; Coca-Cola (KO), up slightly to $50.05; and Johnson & Johnson (JNJ), up a penny to $59.08. (Microsoft publishes MSN Money.)

Only 24 Nasdaq-100 ($NDX.X) stocks were higher, led by Biogen Idec (BIIB), up 5.8% to $49.42, and Genzyme (GENZ), up 5.9% to $52.80. The  index was down 6 points to 1,728.

Marketwatch.com said French pharmaceuticals maker Sanofi-Aventis (SNY) was looking at Genzyme, Biogen Idec and  Allergan (AGN) as acquisition targets. Allergan rose 7.2% to $62.29.

Crude oil fell 81 cents to $72.14, ending the week with an 8.5% loss. Gold was up $1 to $1,207.70. The euro was up 0.3% to $1.25549. The 10-year Treasury yield was at 2.98%, up from 2.927% on Thursday.

Apple (AAPL) was down 0.6% to $246.94. The company disclosed that the formula it used to measure signal strength in its new iPhone 4 is faulty. A software fix will be available in a few weeks.

Financial and industrial stocks were the weak links in the S&P 500. Bank of America (BAC), Caterpillar (CAT) and General Electric (GE) fell 1.3% or more. IBM (IBM), Caterpillar and 3M (MMM) contributed 18 points to the Dow's decline.

Energy prices -- New York close
 

Fri.

Thur.

Month chg.

YTD chg.
Crude oil 

$72.14

$72.95

-4.61%

-9.10%
(per barrel)











Heating oil

$1.9155

$1.9385

-3.34%

-9.46%
(per gallon)











Natural gas 

$4.6870

$4.8540

1.54%

-15.88%
(per mil. BTU)











Unleaded gasoline

$1.9777

$1.9976

-4.02%

-3.66%
(per gallon)











Retail gasoline

$2.7500

$2.7540

-0.18%

4.21%
(per gallon; AAA)












Google is going into the travel business
Google (GOOG) thrust itself into the online travel industry Thursday by agreeing to acquire ITA Software, a flight-information software company, for $700 million in cash.

The deal may well bring fresh antitrust scrutiny to the Internet giant.

Google said the acquisition of ITA, which organizes data such as flight times, ticket availability and prices, will enable it to create online search tools to help people find such information more easily on the Web.

Google said the deal shouldn't raise antitrust concerns -- though it will get thorough regulatory scrutiny. Google doesn't currently compete with ITA, which licenses its technology to help power travel booking sites including Kayak.com and those owned by airlines.

Google shares were down 0.7% to $436.55.

Dell to buy maker of data-center software
Computer maker Dell (DELL) said late Thursday that it had agreed to acquire Scalent, a privately held maker of data-center software, for an undisclosed amount. Dell expects the deal to close in the current quarter.

Scalent, founded in 2003, provides software for automating infrastructure in data centers.

Dell said last week it aims to double to size of its enterprise-solutions business, with acquisitions key to that growth.

Dell was unchanged at $12.03.

Short hits from the markets -- New York close
 
  Fri.

Thur.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.160%

0.165%

-5.88%

220.00%
5-year Treasury note 

1.812%

1.795%

0.95%

-32.54%
10-year Treasury note

2.979%

2.927%

0.95%

-22.48%
30-year Treasury bond

3.941%

3.868%

0.82%

-15.08%
Currencies







 

 
U.S. Dollar Index

84.670

84.984

-1.87%

8.25%
British pound

$1.5188

$1.5175

1.52%

-6.11%
(in U.S. $)











U.S. $ in pounds

£0.6584

£0.6590

-1.50%

6.50%
Euro in dollars

$1.2552

$1.2519

2.32%

-12.43%
(in U.S. $)











U.S. $ in euros

€ 0.7967

€ 0.7988

-2.27%

14.19%
U.S. $ in yen 

88.03

87.73

-0.54%

-5.35%
Canada dollar

$0.941

$0.946

-0.12%

-1.04%
(in U.S. $)











U.S. dollar 

$1.063

$1.058

0.20%

1.04%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,207.70

$1,206.70

-3.07%

10.17%
(per troy ounce)











Copper

$2.9160

$2.8770

-1.17%

-12.86%
(per pound)











Silver

$17.7190

$17.7900

-5.29%

5.19%
(per troy ounce)











Corn

$3.6400

$3.6550

2.75%

-12.18%
(per bushel)











Crude oil 

$72.14

$72.95

-4.61%

-9.10%
(per barrel)










 

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