US Markets Tumble on Weak June Jobs Report

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U.S. markets fell on Friday on a disappointing June non-farm payrolls report. The S&P 500 fell 12.90 points or 0.94% to 1,354.68. The Dow dropped 124.20 points or 0.96% to 12,772.47. For the week,

the S&P 500 fell 0.6%, while the Dow dropped 0.8%.

U.S. June Non-Farm Payroll Disappoints

Friday's US jobs report showed a gain of only 80,000 non-farm jobs in June, which was lower than the 100,000 that the market expected. The unemployment rate remained unchanged at 8.2%. In addition, it was the third consecutive month in which the increase in jobs was less than 100,000. In the second quarter, job growth averaged 75,000 per month, which was far weaker than the 226,000 per month growth in the first quarter. It was also the worst job growth for a second quarter in two years.

Federal Reserve Not Expected to Launch QE3 Imminently

Despite the weak June jobs report, and the weak job growth in the second quarter, most analysts believe that the numbers are not weak enough for the Federal Reserve to immediately launch QE3. Thus, they expect the Fed to continue with its $287 billion extension of Operation Twist.

Three Central Banks Take Action

On Thursday, China's central bank lowered its interest rate by 0.25%, while the ECB lowered its interest rate by 0.25%, resulting in a rate of 0.75%. In addition, the Bank of England increased the size of its quantitative easing program by £50 billion, resulting in a size of £375 billion. The action by the three central banks was to boost their respective slowing economies. The action by the ECB followed a June PMI reading of 45.1 for the euro zone, which was lower than the 50 mark that indicates contraction.

Spanish Bond Yields Remain Unsustainable

Before the three central banks took action, Spain held a bond auction in which its 10-year bonds were auctioned at 6.43%, which was higher than the 6.044% at the last auction. As a result, the yield on 10-year Spanish bonds rose to 6.842%. On Friday morning, following the action by the central banks, the yield on 10-year Spanish bonds remained elevated, at 6.78%.

US ISM Data Indicates Contraction in Manufacturing

On Monday, the ISM reported that its manufacturing index fell to 49.7% in June from 53.5% in May. It was lower than the 52.3% that the market expected. With a reading below 50%, it indicated that the US manufacturing sector is contracting for the first time since 2009.

Looking Ahead to Next Week

Earnings season begins next week, with earnings from Alcoa and JP Morgan. Investors will be paying attention to the size of JP Morgan's trading loss. Investors will also focus on the Fed's meeting minutes, which will be released on Wednesday, to see if there is any indication of a QE3. In addition, investors will watch China's GDP numbers, which economists expect to show a growth of 7.6%.

With U.S. markets little changed from where it was two months ago, better-than-expected earnings could send markets higher. In addition, any indication of a QE3 in the Fed's minutes would provide a boost to markets. However, with the Chinese Central Bank rushing to lower interest rates before its GDP report, the Chinese economy may have cooled more quickly than expected in the latest quarter. Spain will continue to affect the markets, but with investors now accustomed to high Spanish yields, the country is unlikely to affect markets in a significant way next week.

 

US Markets Fall Into Correction Territory on Disappointing Jobs Reports

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U.S. markets tumbled on Friday on disappointing jobs reports from the U.S. and the euro zone. The S&P 500 fell 32.29 points or 2.46% to 1,278.04; the Dow dropped 274.88 points or 2.22% to 12,118.57. For the week, the S&P 500 lost 3%, while the Dow dropped 2.7%. The S&P 500 is now in a correction, after falling 10% from its April 2^nd highs. The index also closed below its 200-day moving average for the first time in 2012 on Friday.

Disappointing Jobs Report from the U.S. and euro zone

On Friday, the U.S. May jobs report showed a gain of only 69,000 non-farm positions, which was far lower than the 165,000 that economists expected. In addition, the unemployment rate rose for the first time since July 2011, to 8.2%.

Meanwhile, the unemployment rate in Spain, France, Italy and Portugal also rose in May, causing the unemployment rate in the 17-member euro zone to reach 11%.

Troubles in Spain Continue

On Friday, Spain's central bank announced that in the first quarter, $97 billion euros were pulled from the country's financial sector. The amount is approximately 10% of Spain's GDP. In addition, the yield on 10-year Spanish debt reached 6.63%, as it continued to head towards the dangerous 7% level. Spanish 5-year CDS, which reflects the probability of a default, reached 615 basis points, a historical high.

U.S. Manufacturing Weakens

On Thursday, U.S. first quarter GDP was adjusted downwards to 1.9%. In addition, initial jobless claims was higher than expected, increasing by 10,000 to 383,000. May Chicago PMI fell to 52.7, close to the 50 mark and its lowest level since September 2009.

Looking Ahead to Next Week

A sustained rally in the market in the coming weeks would likely require stimulative measures from the US Federal Reserve. The Fed is scheduled to meet on June 19-20, and an extension of Operation Twist or an introduction of QE 3 would send markets higher by double digits over several months. Some analysts expect the Fed to take action at a later date, in August.  Ben Bernanke is expected to testify before Congress on Thursday, and he might give a hint of how the Fed intends to act.

In the coming week, if euro zone leaders announce concrete measures and few bad news emerge from the euro zone, markets could get an upward bounce as a result of bargain hunting. Regardless of the direction of the market in the coming week, the magnitude of its movement, either upwards or downwards, will likely be large, as volatility increases.

S&P 500 Posts Best Week In One Month

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 U.S. markets rose on Friday on better-than-expected earnings from Amazon. The S&P 500 rose 3.38 points or 2.24% to 1,403.36. The Dow gained 23.69 points or 0.18% to 13,228.31. For the week, the S&P 500 gained 1.8% for its best week in a month, as strong corporate earnings overshadowed concerns about the euro zone. The S&P 500 also closed above the psychologically-important 1,400 level.

U.S. First Quarter Growth Disappoints

On Friday, the U.S. Commerce Department announced that first quarter GDP growth was 2.2%, which was lower than the 2.5% the market expected. However, it was higher than the 1.5% that economists expected at the beginning of the year, which prevented the market from falling on the news. On Thursday, U.S. initial jobless claims also disappointed the market, when it fell by only 1,000, to 388,000.

Spain Downgraded by S&P

On Friday, S&P announced that it is downgrading Spain's rating by two notches, from A to BBB+. S&P has also placed Spain's rating on negative watch, and stated that Spain's banking system was too reliant on government funding. Meanwhile, Italy's bond auctions disappointed investors, with the yield on its 10-year debt at 5.84%, which was 60 basis points above last month's auction.

Federal Reserve Reiterates Stance

On Wednesday, after the Fed's much-anticipated meeting, it announced it is continuing its stance of keeping interest rates at the current level until the end of 2014. However, it did not mention QE3.

UK Slips Into Double-Dip Recession

Also on Wednesday, the UK announced that first quarter GDP shrank by 0.2%, which was weaker than the 0.1% growth the market expected. With the negative 0.3% growth in the fourth quarter, the UK is now officially in a double-dip recession.

Apple Boosts Markets

On Wednesday, U.S. markets received a boost from Apple's earnings. The company's profits rose 94% from last year to $11.6 billion. EPS was $12.30, higher than the $9.94 the market expected.

Markets Tumble on Netherlands and France

On Monday, markets tumbled when the Prime Minister of the Netherlands resigned due to a disagreement in parliament over austerity measures. In addition, with the second round of federal elections in France about to get underway, investors faced a large degree of uncertainty. As a result, the yield on Spain's 10-year government bonds rose above 6%, and stock indices in Europe fell more than 1%.

Looking Ahead to Next Week

Investors will be paying close attention to the U.S. March jobs report on Friday. On Wednesday, the ADP jobs report will be announced. In addition, investors will continue to pay attention to corporate earnings. So far, 57% of S&P 500 companies have posted earnings. Next week, companies including Visa, Kraft and Prudential will be reporting results.

With the situation in Spain showing no signs of improvement, it will take stronger-than-expected earnings just to keep the market from falling. If the yield on Spanish debt rises, then the market will likely fall regardless of earnings results. With the UK now in a double-dip recession, it will likely conduct quantitative easing, which should boost the prices of gold and silver.

 

S&P 500 Posts Worst Week in 2012 on Rising Spanish Yields

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U.S. markets fell on Thursday in a shortened week of trading, as rising yields on Spanish government debt continued to trouble markets. On Thursday, the S&P 500 slipped 0.88 points or 0.06% to 1,398.08. Meanwhile, the Dow fell 14.61 points or 0.11% to 13,060.14. For the week, the S&P 500 fell 0.7%, which is its worst weekly performance in 2012.

U.S. Jobs Numbers Disappoint

On Friday, the U.S. jobs data for March showed a gain of 120,000 jobs, which was worse that the 203,000 the market expected. The gain was also the smallest in 5 months. However, the unemployment rate in March fell by 0.1% to 8.2%. It was better than the 8.3% economists expected, and was the lowest since January 2009. However, the 0.1% fall in unemployment was likely due to workers giving up searching for work.

Initial Jobless Claims Falls to 4-Year Low

U.S. initial jobless claims have been consistently below the critical 400,000 mark in recent weeks. On Thursday, initial jobless claims fell by 6,000 from the previous week, to 357,000. It was the lowest level in 4 years.

Spanish Yields Sink Markets

Following weak demand in Spain's bond sale on Wednesday, Spanish debt yields rose to levels last seen during the euro zone debt crisis. Investors became concerned about whether Spain would eventually need a bailout. This sank world markets on Wednesday, and continued to drag on markets on Thursday.

Federal Reserve Minutes Disappoints Investors

On Wednesday, minutes from the recent Federal Reserve meeting helped to push markets lower. The minutes indicated the Fed will not consider another round of quantitative easing in the near future. World markets fell as a result, since investors prefer more liquidity in the markets.

Looking Ahead to Next Week

The start of earnings season next week will likely determine the direction of U.S. markets. Companies including JP Morgan and Google will be reporting their quarterly results. In addition, investors will be closely watching data from China next week, as the country will be releasing first-quarter GDP, inflation and trade balance numbers.

The weaker-than-expected U.S. March jobs data on Friday will likely pull markets lower on Monday. In addition, the rising Spanish bond yields will likely affect markets negatively early next week. Thus, unless companies post better-than-expected earnings, U.S. markets will likely fall next week.

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