U.S. Market Snapshot: Stocks Mixed on Weak Economic Data
After paring earlier losses due to weak data on U.S. industrial production and regional business activity, U.S. stocks closed mixed to lower today with only the S&P 500 index marginally higher, despite JPMorgan and Co. reporting better-than-expected Q2 results. The passage of the financial reform bill and Goldman Sachs’ consent to settle the case with the SEC lifted the market sentiment later in trading.
The Senate approved the financial reform bill, handing the bill to President Barack Obama to sign. The overhaul of the financial system covers a wide range of issues and will have implications for the financial firms, consumers, federal regulators and government actors. Ben Bernanke said the new legislation “represents a welcome and far-reaching step toward preventing a replay of the recent financial crisis,” WSJ reports. See RGE CI: Senate Approves the Financial Reform Bill.
JPMorgan Chase and Co., the second largest U.S. bank in assets, reported Q2 earnings of $1.09 per share beating the average estimate of 70 cents by the analysts surveyed by Bloomberg. JP Morgan is the first of the three largest U.S. banks to report with Citigroup and Bank of America to follow tomorrow.
For Q2, earnings per share for companies included in the S& P 500 index are expected to be about $20.67 or 4.85% up from Q1 EPS, which was $19.7, according to Bloomberg.
Google Inc. reported after the close Q2 earnings of $6.45 per share missing mean estimates of $6.52 by the analysts surveyed by Bloomberg. The company’s net income and revenue both grew by 24%, while operating expenses increased as well.
Goldman Sachs Group Inc. is reported to settle a lawsuit with the SEC by agreeing to pay $550 million, according to Bloomberg. GS shares were up 4.43% to close at $145.22, 22% down from this year’s high of $184.92 on April 14, 2010.
The Dow slid 0.07% with financials falling 1% on the financial reform bill, followed by industrials and health care. On the flip side, technology and consumer services both rose 0.20%. JPMorgan rose 0.27% to $40.46 after reporting better-than-estimated Q2 results.
The S&P 500 inched up 0.12% with seven of ten sectors in positive territory. Utilities and consumer services led the advance, while the basic materials group slid 0.45% on weak U.S. manufacturing data and financials fell 0.13% pressured by the passage of the financial reform bill and its implications for big banks’ profits.
In Canada, the S&P/TSX composite index rose 1.05% with all ten sectors in the black. Health care, industrials and consumer goods advanced the most and led a broader advance.
Into close, the S&P 500 index rose 1.31 points or 0.12% to close at 1,096.48.
The Dow fell 7.41 points or 0.07% to close at 10,359.31.
The tech-heavy Nasdaq composite index was down 0.76 points, or 0.03% to close at 2,249.08.
On the economic calendar, the Federal Reserve Board reported that industrial production remained largely flat in June 2010, up 0.1% m/m, held up entirely by a 2.7% gain in the production of utilities. Manufacturing production fell 0.4% m/m, following a gain of 1% in May, on July 15, 2010. Mining activity posted a 0.4% gain in June, after a 0.3% contraction in May. The decline in manufacturing activity was driven by a 0.7% decline in the manufacturing of non-durables, with declines in food products, textiles, chemicals and paper. Durable goods manufacturing posted an anemic 0.1% m/m gain. Industrial capacity utilization in June 2010 stood at 74.1%, unchanged from May 2010. Capacity utilization remains 6.5% below the 1972-2009 average of 80.6%. Manufacturing capacity utilization stood at 71.4% in June, 7.8% below the 1972-2009 average of 79.2%.
The July 2010 Philadelphia Fed regional business activity index showed that manufacturing activity “slowed over the past two months.” The index for current activity fell further, to 5.1 in July after falling to 8 in June from 21.4 in May, indicating weakening expansion in activity. (Positive values indicate improvement in activity). The forward-looking activity index rose slightly, to 40.2 in June from 37 in May. Firms reported a decline in prices received, while prices paid eased somewhat. The index for future manufacturing activity fell 15 points to reach 25 in July, indicating the lowest expected rate of expansion in 16 months.
The U.S. Department of Labor reported that initial unemployment claims fell by 29,000 to reach 429,000 in the week ending July 10, 2010, after a revised decrease of 17,000 in the previous week. The four-week moving average of initial claims fell by 11,750 to reach 455,250. Analysts estimate that initial claims below 400,000 are consistent with job gains. While improvement in payrolls in early 2010 has been greater than that predicted by the claims data, the persistence of claims at an elevated level is reflective of weak hiring trends and a jobless recovery.
Treasurys prices rose with the yield on the benchmark 10-year Treasury note down yielding 2.98% down from 3.05% from late Wednesday.
In commodity markets, light crude for August delivery settled down 42 cents, or 0.6% up at $76.62 a barrel on the New York Mercantile Exchange amid concerns over the slowing economic growth.
In currency markets today the euro jumped to a 2-month high against the dollar on growing concern over the slow recovery in the U.S. and receding worries about the European debt burdens.
In currency, EUR/USD traded at 1.2944, up from 1.2739 late on Wednesday in New York. The GBP/USD was quoted at 1.5455, up from 1.5263. USD/JPY traded at 87.37, down from 88.42. USD/CHF was at 1.0412, down from 1.0538, while USD/CAD was quoted at 1.0412, up from 1.0330.
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