U.S. equities dumped then pumped in exciting trading on Thursday. Volume was high, at 105% of the 30-day average on the New York Stock Exchange, as traders positioned for Friday’s critical non-farm payrolls report. The results will be closely watched for clues on the odds of Federal Reserve interest rate hikes in September and December.
In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 Index lost a fraction, the Nasdaq Composite gained 0.3% and the Russell 2000 gained a fraction. Treasury bonds were mostly stronger, the dollar weakened, gold wafted higher adding 0.4% and crude oil lost 3% extending its recent selloff.
Defensive utility stocks were hit with a 0.4% loss on higher Treasury yields. Technology stocks were the leaders, up 0.4%. Wynn Resorts, Limited (NASDAQ:WYNN) gained 4.3% on a 1.1% jump in Macau gaming revenue (versus expectations for a 1% loss), marking the first increase in more than two years. Costco Wholesale Corporation (NASDAQ:COST) fell 3.6% after reporting flat August comp-store sales vs. the 1.4% jump expected.
There was also some intraday buying focused on retailers like J C Penney Company Inc (NYSE:JCP), which found support at its 50-day moving average as the post-earnings selloff appears to have run its course and the post-May uptrend reasserts itself. Edge subscribers are holding a position in the retail turnaround story.
On the economic front, the surprise was a weaker-than-expected ISM manufacturing report, which fell into contractionary territory at 49.4 in August down from 52.6 previously and the 52.0 that was expected.
This is the first outright drop in activity since February as factories worry about the outcome of the upcoming presidential election. New orders cratered to 49.1 from 56.9 while employment fell to 48.3 from 49.4.
Looking ahead to the jobs numbers, August has seasonally been a disappointment. Analysts are penciling in a 183,000 payroll gain after July’s 255,000 rise and the 292,000 increase in June.
The jobs slowdown, mixed with the weak factory data, will likely put the kibosh on expectations for a rate hike this year — potentially fueling a relief rally in stocks.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
