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Today's WrapUp by Scott Middleton 06.19.2003 Mon Tue Wed Thu Fri Archive |
Mending Economy?
So says the headlines today. Economic reports today showed a fall in the U.S. jobless claims, signs of a pickup in mid-Atlantic factories, and a gain in the leading economic indicators index. Well, at least on the surface of the reports they showed some promise, however…
First time claims for unemployment fell for the second week in a row, dropping by 13,000 to 421,000. The claims number was lower than expected, but concerns are growing as the four-week average has held above the 400,000 level for 18 weeks. Along with this week’s announcements from the likes of EDS – 2700 jobs and UBS – 500 investment bankers along with a survey completed by Manpower indicating that U.S. employers’ hiring plans are the lowest in 12 years, we see no light at the near end of this tunnel.
Taking its cue from the New York Fed report earlier this week, the Philadelphia Fed Bank said its June factory index rose for the first time following three months of declines. The bank indicated its factory business conditions index rose 4.0 in June from -4.8 in May. Many economists had recently upped their expectations to 4.1 after the strong report from the New York Fed’s Empire State manufacturing survey earlier this week. While reversing the three-month decline it was still unable to meet or exceed what many economists saw forthcoming. Following the Philadelphia Fed report and the current account deficit figure of $136.1 billion, the U.S. Dollar lost ground as investors realized the data was not very encouraging.
Along with the slew of poor economic data some top blue chip companies led the indexes lower. GE led by speculation that the company would trim its own 2003 earnings estimates at their scheduled analysts meeting on Friday, dropped 3 percent to $29.86. Also weighing on the market was Morgan Stanley, which had its rating cut by two rival brokerages, a day after it reported a 25 percent drop in quarterly earnings.
Financial Markets
The Dow Jones industrial average fell 114.27 points, or 1.23 percent, to 9,179.53, while the broader S&P 500 was down 11.16 points, or 1.1 percent, to 998.93. The technology-laced Nasdaq Composite Index lost 28.55 points, or 1.7 percent, to 1,648.59. Selling was fairly broad, with 27 of 30 Dow stocks declining. European and Asian markets closed lower, while a rise in gold prices and Treasury bonds, as well as a mixed dollar, added to the negative pressure on stocks. Market breadth was negative. Decliners beat advancers by around two to one on both the New York Stock Exchange and the Nasdaq. On the NYSE, 1.50 billion shares changed hands, and 1.94 billion shares traded on the Nasdaq.
The dollar continued to show strength against the yen, climbing 0.3 percent to 118.27 yen, while the euro added 0.4 percent to $1.1721. The price of gold rallied $4.00 to $361.80 an ounce in New York. Also in New York, light crude oil futures fell 26 cents to $28.51 a barrel.
Treasuries
Government bonds closed on a mixed note, with the 10-year Treasury note up 5/32 to yield 3.35 percent while the 30-year government bond fell 9/32 to yield 4.415 percent. Yields on longer maturities have moved up substantially over the past week amid a string of better-than-expected economic reports.
Overseas Markets
European stocks fell, sending the Dow Jones Stoxx 50 and 600 indexes to their biggest losses in a month, on concern share prices more than reflect earnings prospects after a three-month rally. Banks and insurers including Deutsche Bank AG and Swiss Reinsurance Co. led declines. Benchmark indexes slumped in 14 Western European markets open for trading; only Norway and Luxembourg rose. Germany's DAX Index fell 1.7 percent. The U.K.'s FTSE 100 Index declined 1.8 percent and France's CAC 40 Index slipped 1.5 percent.
The Nikkei erased earlier losses and closed up 17.54 points, or 0.19 percent, to 9,110.51. The index has gained nearly 270 points in the past three days, and is up 8.1 percent since the start of this month. The broader Topix added 0.2 percent to a fresh six-month high of 895.65.
Copyright © 2003 Scott Middleton
June 19, 2003
Graphic Source: www.stockcharts.com
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