The ADP employment change report for August, which was released yesterday, showed more jobs lost than analysts expected, so stocks fell for the fourth-consecutive day.
Economists had expected 250,000 jobs lost, and instead the report indicated that 298,000 were lost. This puts special focus on Friday’s official jobs number, so the market may not do much until then.
The less-than-perfect economic results continued with the July factory orders. Even though the orders were the best so far, they missed the expected target of 2.2% with a reported increase of only 1.3%.
This week was expected to be focused on economic issues. What was not expected was the odd response of investors who sold heavily on Tuesday on good news, while Wednesday they were much more tolerant of bad news — go figure.
At the close, the Dow Jones Industrial Average (DJI) was off 30 points to 9,281, the S&P 500 (SPX) fell 3 points to 995, and the Nasdaq (NASD) lost 2 points to 1,967.
The NYSE traded 1.4 billion shares with decliners ahead by 3-to-2. On the Nasdaq just 612 million shares traded with slightly more decliners than advancers.
October crude oil closed at $67.63, down 10 cents, and the Energy Select Sector SPDR (XLE) fell 37 cents to $49.91.
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December gold gained $22, closing at $978.50 an ounce, as it broke through some major technical barriers in response to another decline in the U.S. dollar and concerns over the economy. The PHLX Gold/Silver Index (XAU) rose $12.35 to $156.87.
What the Markets Are Saying
Yesterday’s mild decline in the face of worse-than-expected economic numbers is just as perplexing as Tuesday’s decline in the face of better-than-expected numbers.
Since they tend to offset one another, let’s leave it at that and chalk up the market’s somewhat bizarre behavior to the abnormalities sometimes experienced before major holiday weekends.
But some technicians have already concluded that the breakouts to recovery highs in late August have failed. In my opinion, this conclusion is premature since we had four very good days last week, which established another grouping of new highs.
So far, this week’s pullback has taken prices to the 980 to 1,010 support zone of the S&P 500 for the second time. And the pattern is still clearly within the narrow bounds of the near-term bull channels that are intact in all three of the major indices.
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Granted, yesterday’s lows rest almost exactly on the support lines of the bull channels, so a closing low today would penetrate that slender thread of support. But in order for the intermediate trend to break, the S&P 500 would still have to close under 980, and that’s almost 15 points away.
Since anticipation is often followed by disappointment, let’s go with the trend, and that is still up.
And if the bull channel is broken on the downside, we will look forward to buying our favorite investments at the next zone of support at 940 to 960.
Today’s Trading Landscape
Earnings to be reported include: ArcSight, Cascade Corp., Ciena Corp., Cooper Companies, Del Monte Foods Co., Esterline Technologies Corp., G-III Apparel Group Ltd, Jackson Hewitt Tax Service, Korn/Ferry Int’l, Layne Christensen Co, Quiksilver, Shanda Interactive Entertainment Ltd., Teekay Corp., Ulta Salon Cosmetics & Fragrance, UTi Worldwide and Wind River Systems.
Economic reports due: jobless claims (the consensus expects 562,000), DJ-BTMU U.S. Business Barometer, ISM non-manufacturing index (the consensus expects 48.8), EIA natural gas inventories, money supply, Fed discount window borrowings and foreign central bank holdings.
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