Bears Claw Away at Bulls’ Gains!
What did we get yesterday?! The market in tailspin after job numbers disappointed and geopolitical concern from North Korea again rearing its ugly head. Market bears had threatened for weeks to take matters into their own hands, but when push came to shove, their efforts fell flat. We’ve seen little but sideways movement over the last few weeks on market indexes, sharp losses followed the next day by a quick recovery as moneys rotated out of the tech sector and into financial and energy stocks.
Yesterday, the bears made a nice move! The bulls’ correction attempt in intraday trading went nowhere, indexes ending at their daily lows. There was no place to run for cover in the market, the trading environment gloomy with only 1,250 stocks ending up, 5,500 dropping.
Even though we didn’t see overwhelming selling yesterday, the selling pressure encompassed a large swath of the market, causing some technical damage. The S&P 500 closed beneath its 50 period EMA for the first time since mid-May – and it could be that the biggest twist in yesterday’s trading was players’ scant interest in buying the weakness. For quite some time, now, players – almost automatically – surfaced to buy the corrections, though yesterday, they hesitated.
Warning sings had been flickering for some time, so yesterday’s movement shouldn’t come as a surprise. It’s just the nature of the beast in the market, the market going through different cycles, refreshing its ranks.
All-in-all, only 158 thousand new jobs were created in the private sector based on the ADP report released yesterday before opening. The number fell far short of the projected number of 185 thousand, a fact that points to cooling in a job market near full capacity. Other figures showed that weekly unemployment claims rose for the third week in a row, climbing to 248 thousand, above early forecasts of 243 thousand.
Despite these figures still pointing to a tight job market, they hint at a disappointing job report today before opening, one that includes both private and public sector hiring.
The geopolitical tension also weighed on sentiment yesterday on Wall Street, after President Trump said that he was mulling a “very severe” response to North Korea’s missile test launch, in whose context a missile landed in Japan’s territorial waters. Trump, likewise, prodded world countries to show North Korea that there will be consequences for its missile program.
Daily Summary: The Dow Jones fell 0.74%. The S&P 500 dropped 0.94%, the NASDAQ slipping 1%. Yesterday’s losses signified the sharpest percentage decline in the S&P 500 since May 17th.
Tesla (TSLA) toppled 5.56% after the premium electric carmaker announced that it had not received the top crash-test rating.
Limited Brands (LB) plunged 14.08%, making it the worst performing stock on the S&P 500 after the owner of Victoria Secrets, noted that its June sales fell short of expectations.
About 6.6 billion shares changed hands on U.S. exchanges, beneath the 7.18 billion average over the last 20 trading days.
Friday: The market consensus is for growth in today’s job market figures, the prime focus though being on whether wages are on the uptick. Expectations have the American economy tacking on 179 thousand new positions in June. What economists are more worried about, though, is whether wages are showing signs of a rapid rise, the consensus now being an uptick of 0.3% for June, or an annualized pace of 2.6% after May’s 0.15% rise.
Focus on wage figures has grown of late, since the Fed signaled that it hopes to start tapering its balance sheet holdings and also hike rates again before the year comes to a close. Until now, the market had been skeptical that the Fed could hike rates again this year. A lot, though, will depend on inflation and whether it’s showing signs of growth which is the condition the Fed needs to be in place before pulling the trigger. That’s why wage growth is important, because it can be a preliminary signal of higher inflation.
The employment figures will be released today at 8:30 N.Y. time.
Friday’s Hot Stocks: DISH, CPB, MDLZ
Have a great trading day!
|Tuesday||–||4th of July|
Independence Day – Wall Street is Close
|Thursday||8:15||ADP Employment Change||185K||High|
|Thursday||11:00||Crude Oil Inventories||–||Low|
|MLHR||Herman Miller, Inc.||AMC||Wednesday|
|YUMC||Yum China Holdings, Inc.||AMC||Wednesday|
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