Stocks slip ahead of jobs report

The major indexes post minor losses. Wheat soars after Russia stops grain exports. Analysts see US unemployment rising to 9.6%. Retailers report tepid sales.

By Charley Blaine Aug 5, 2010 2:41PM
UCharley Blainepdated: 9:50 p.m. ET

Stocks pulled back very slightly today in relatively light trading as Wall Street awaited the Friday jobs and unemployment report.

A surprising gain in jobless claims appeared to dismay traders.

The market was also held back by weakness in technology and financial stocks. Shares of retailers were mixed after companies released their July sales reports.

The Dow Jones industrials ($INDU) closed down 5 points to 10,675, trading in a narrow range of just 67 points during the day.  The Standard & Poor's 500 Index ($INX) was off 1 point to 1,126, and the Nasdaq Composite Index ($COMPX) slipped 11 points to 2,293.

Kraft jumps on earnings beat

Kraft Foods (KFT) shares were up 4.6% after hours after beating Street estimates on earnings. Kraft earned 60 cents a share, after one-time expenses, ahead of the Street estimate of 54 cents. Revenue was up 21.4% to $12.32 billion. That includes results from candy maker Cadbury, which Kraft acquired in February.

But shares of video-game-maker Activision Blizzard (ATVI) sagged 6.2% to $11.02 after the company's second-quarter revenue of $683 million missed the consensus analyst estimate of $718.9 million.

EOG Resources (EOG) shares were off slightly to $102.37. Earnings of 24 cents a share met Street estimates. Revenue of $1.36 billion, up 43% from a year ago, was greater than the Street estimate of $1.24 billion.
Modest movement the day before a jobs report is fairly typical. No trader wants to make a bet that will go sour the next day, especially when improvements in the job market are so frustratingly slow.

Crude oil settled down 46 cents to $82.01 a barrel. Gold settled up $3.40 to $1,199.30 an ounce. Interest rates were lower, with the 10-year Treasury yield falling to 2.915% from 2.952% on Wednesday. The dollar was down slightly against the Canadian dollar, the euro and yen but up against the British pound.

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Will the unemployment rate rise?
The report will come out at 8:30 a.m. ET Friday, and most economists expect the national unemployment rate to rise to 9.6% from 9.5% in June.

Nonfarm employment is expected to decline by 60,000, but much of the decline will be due to the release of workers hired to do the national census.

Private-sector employment will be watched more closely. The consensus is for a gain of 70,000 jobs. That would be the seventh straight month of gains in this category. So far, private-sector employment has grown by 593,000 jobs, or about 99,000 jobs a month.

The tension over the report rose today after the Labor Department said initial jobless claims increased by 19,000 to 479,000 last week, the most since April. Most economists had been looking for a decline.

The increase in jobless claims means "employers lack the confidence to expand their production because they’re uncertain how much momentum is out there," Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Va., told Bloomberg News.

But before one writes off the jobs picture, the Monster Worldwide Employment Index suggests that employers are starting to think about hiring. The index, compiled by online job site, measures intent to hire. It dropped slightly from June to July, but it is 21% higher than a year ago.

The July decline appeared to reflect seasonal patterns, spokesman Matthew Henson said. Summer hiring for college students is completed by July, for example.

The index is compiled from online job sites around the Web and tends to be a leading indicator. It started to dip in late 2007, ahead of the employment crash that erupted in 2008 and 2009.

Wheat is where the action is
If you're looking for action today, the place to be is wheat, thanks to the worst drought in Russia for the last 50 years.

The Russian government said today it would not allow any exports of wheat, barley, rye, corn or flour from Aug. 15 to Dec. 31.

Wheat settled up 8.4% at $7.8675 a bushel in Chicago, the highest level since 2008. Wheat's up 18.6% for the week and 63% just since June 30. Corn was up 0.8% to $4.035 a bushel. It's up 13.% this quarter alone.

The export ban is "appropriate" to keep domestic prices in check, Prime Minister Vladimir Putin told a government meeting in Moscow.

Russian farmers weren't happy. "You can congratulate American farmers who are going to take the niche that Russian farmers are leaving," Anton Shaparin, spokesman for the Russian Grain Union, told The New York Times. The union is a lobbying group for farmers.

Grain prices jumped 19% last week, faster than at the peak of the global food crisis in 2008.

Russia's not the only country with problems. Drought has hurt crops in Ukraine, Kazakhstan and in Europe. Rains have hurt Canadian crops. 

Shares of grain merchants such as Bunge (BG) and Archer Daniels Midland (ADM) were up 5.6% to $54.48 and 5.7% to $30.25, respectively. Fertilizer makers Agrium (AGU) and Potash of Saskatchewan (POT) rose 1.4% to $67.15 and 2.6% to $114.24, respectively. General Mills (GIS) was off 2.2% to $33.85.

The PowerShares DB Agriculture exchange-traded fund (DBA) was off 0.8% to $26.14. Volume for the ETF has soared in the last week. Between June 1 and July 22, about 853,000 shares traded every day. Since, the volume has averaged 1.47 million shares a day.

The ETF is based on prices for a variety of agricultural commodities, including cattle, hogs, wheat, corn and soybeans. The ETF is up 14% since hitting a bottom on June 7.

Financials move lower
Only eight of the 30 Dow stocks were higher today, led by Caterpillar (CAT), United Technologies (UTX) and Procter & Gamble (PG).

Caterpillar and United Technologies generate significant revenues outside the United States, with Europe a most important market.

Financial stocks were the biggest drag. American Express (AXP) was the worst Dow performer, down 2% to $43.22. Regional banks were hit hard; Regions Financial (RF) was off 1.7% to $7.47.

Weakness in Apple (AAPL), Microsoft (MSFT), Research In Motion (RIMM) and Oracle (ORCL) held tech shares back. (Microsoft publishes MSN Money.)

Retailers report disappointing results
The slowdown affecting the country hit July shopping. So did hot weather in much of the country.

So, a number of retail stocks are lower. Value-oriented department stores appeared to do well. Kohl's (KSS) was up 4.1% to $49 after reporting same-store sales were up 4.1% in July. Same-store sales (or sales at stores open at least a year) are a key statistic for investors.

Same-store sales at Target (TGT) were up 2%. Shares rose 2.6% to $52.86. Macy's (M) shares were up 1.8% to $19.78. Its July same-store sales rose 7.3%. JC Penney (JCP) fell 7.7% to $22.12 after it reported same-store sales fell 0.6%.

Teen retailers were struggling.

The 28 retailers tracked by Thomson Reuters reported a 2.9% rise in July sales at stores open at least one year, missing Wall Street forecasts of 3.1%. Seventeen  reported lower-than-expected sales, while nine beat estimates.

Short hits from the markets -- New York close


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