Market Report: Stock Ticker

June unemployment rate rises, but not as much as expected; actual job loss tally exceeds consensus estimate

Factory orders for May climb more than expected

Weak
autoparts and equipment; industrial REITs; human resources and employment services; diversified REITs; trucking; retail REITs; office REITs; multisector holdings

[BRIEFING.COM] A disappointing jobs report prompted sellers to knock stocks sharply lower in the first few minutes of trading. Stocks then locked into an extremely narrow trading range until the S&P 500 slipped below the psychologically significant 900 level in the final half-hour of trading.

Following an uninspiring finish to the previous session, stocks had already been showing weakness ahead of the government's latest jobs report, which was released shortly before the opening bell. However, sellers became emboldened when the June Nonfarm Payrolls report indicated that 467,000 jobs were lost last month. That marked pickup from the 322,000 jobs that were lost in May, and topped the 365,000 losses that were widely expected.

Meanwhile, the national unemployment rate now stands at 9.5%, which isn't quite as bad as the 9.6% that was expected, but it still marks a 25-year high. According to Reuters, the White House expects unemployment rate to climb to 10% in next two to three months. Average weekly hours came in at a slightly worse-than-expected 33.0. Since hours often lead payrolls and employers are cutting back hours suggests that hiring remains a long ways off, which will damper consumer spending and hopes of a consumer-led economic recovery.

May factory orders made a surprisingly strong 1.2% increase, which bested the 0.9% increase that had been forecast. The stock market attempted to pare some of its losses following the orders announcement, but the disappointing jobs report dominated headlines and overshadowed the encouraging orders data.

Since U.S. market's are closed Friday in observance of Independence Day, this session's decline gave stocks their third straight weekly loss. During that time, stocks have shed more than 5%. This session's weakness was widespread as declining issues outnumbered advancers by more than 20-to-1 in the S&P 500.

Losses were steepest among energy and financial stocks. They both finished 3.7% lower. Energy was hampered by a 3.7% drop in crude oil prices, which closed at $66.73 per barrel. Crude has fallen for three consecutive sessions. Meanwhile, financials were severely undercut by losses among insurers.

Elan (ELN 7.66, +0.66) was one of the few stocks to post a gain this session. The company garnered support following the announcement that Johnson & Johnson (JNJ 55.97, -1.10) will acquire certain drug assets from Elan and will invest $1 billion in Elan through an affiliate.

In other corporate news, Exelon (EXC 49.03, -2.53) has increased its exchange offer to acquire NRG Energy (NRG 24.59, -1.46) by 12%. The increase was widely expected and neither stock was able to attract buyers amid the session's broad-based selling effort.

Trading volume was extremely light ahead of the long, holiday weekend. Hardly 700 million shares traded hands on the NYSE in what was the most thinly traded session this year. That's even after trading had been extended by 15 minutes in order to address system irregularities.

[BRIEFING.COM] The equity markets have pushed to fresh session lows after trading in a very narrow range for most of the session. The major indicies have traded on anemic volume, as well. A strong dollar coupled with a concerted selling effort in the equity markets did not bode well for commodities this session. The dollar is currently up 0.7%.

Bullish inventory data was not enough to support natural gas prices this session. Following the inventory data, natural gas futures spiked to near the unchanged level. This spike following the data did not last, though, as natural gas futures headed lower for the remainder of the session and closed down a staggering 4.5% at $3.62 per contract.

Crude oil contracts also sold off relentlessly. The August contracts closed not far off the session lows of $66.50 per barrel. They closed down 3.7% at $66.73 per barrel.

Both gold and silver futures got hammered at the open of the pit trade. Both also trended modestly higher throughout the session, but struggled to net appreciable gains off the session lows recorded at the open. August gold futures closed down 1.1% at $930.50 per ounce as September silver futures closed down 2.5% at $13.41 per ounce.

[BRIEFING.COM] Corporate news flow has been slow this session. However, Exelon (EXC 49.42, -2.14) did announce this morning that it has increased its exchange offer to acquire NRG Energy (NRG 24.76, -1.29). Exelon is now offering to exchange for each NRG share 0.545 of EXC shares. The exchange rate marks a 12% increase over the initial exchange offer of 0.485. However, as of the prior session's close, shares of EXC are down roughly 5.5% since the initial offer was made back in October.

Following this morning's announcement, Exelon affirmed its second quarter and full-year earnings guidance, which call for earnings from $0.95 to $1.05 per share in the second quarter and earnings from $4.00 to $4.30 per share for the year.

[BRIEFING.COM] Of the 10 major sectors in the S&P 500, energy is faring the worst. The sector is currently down 3.2% as it moves toward its worst single-session performance since a 4.6% drop in the early part of last week.

Though still steep, losses are least severe in the consumer staples sector, which is down 1.3%. General Mills (GIS 58.55, +0.37) is providing support to the sector for the second straight session. Its strength started in the prior session following the company's announcement of better-than-expected earnings and an upbeat forecast for fiscal 2010. Shares of GIS are at their highest level since February.

[BRIEFING.COM] The S&P 500 remains confined to a narrow trading range that is trending just above the 900 level. The benchmark index has yet to violate the psychologically significant line, though.

Given today's losses, the S&P 500 is on track for a weekly loss of 1.9%. That would mark the third straight weekly decline for the stock market. This week's decline is currently worse than the Dow's week-to-date loss of 1.3%, but not quite as bad as the Nasdaq's 2.0% loss.

Small-cap stocks have suffered the most this week. In turn, the Russell 2000 is on track for a weekly loss of 2.5%. Most of that decline is coming from this session's 3.3% loss.

[BRIEFING.COM] The major indices continue to trade with steep losses.

Market breadth is negative, with decliners outpacing advancers by 11-to-2 on the NYSE and by 5-to-1 on the Nasdaq.

[BRIEFING.COM] A negative tone for the session was set in pre-market trade when June Non-Farm payrolls showed a much steeper than expected loss. Specifically, Nonfarm Payrolls came in at -467,000 vs the -367,000 consensus. The national unemployment rate is now at a staggering 9.5%, although this was slightly better than the 9.6% expectation. Optimists had hoped that the trend toward smaller declines would produce a decline of about 300,000 this month -- but companies do not hire/fire based on such trends. Further large payroll declines are likely. Until weekly unemployment claims drop below 400,000, payrolls are going to continue declining.

The payroll data wasn't much better. June average hourly earnings on a month over month basis was flat versus a +0.1% consensus, and average weekly hours also came in slightly worse than expectations at 33.0. Hours tend to lead payrolls and the fact that employers are cutting back hours suggests that hiring is a long ways off. Also negative from an economic standpoint is that fact that hourly earnings in June were flat. This indicates that consumer purchasing power is falling (when combined with lower payroll levels).

Not all the economic data was bad this morning, however. May factory orders surprised to the upside at +1.2% vs the +0.9% expectation. Orders had plunged in December and January, but have now stabilized over the past four months. This is a good sign that suggests industrial production may stabilize, but orders still remain below about 20% the levels of last year. The stock market saw a modest rebound following the release of this factory order data, but it was short lived, as the dour unemployment data has been dominating the news, and the sentiment today.

Since the release of the economic data, news flow has slowed considerably, as has volume. Volume will likely continue to drop off as the afternoon wears on, heading into the holiday weekend. The major averages have generally moved in a sideways fashion for most of the morning without a significant catalyst to make a move in either direction. Losses have been broad based and there isn't a single sector putting in meaningful gains today. The weakest sectors include retail, energy, and industrials. Crude oil and natural gas both have been down sharply as well, although natural gas pushed higher following inventory data that showed a a build of 70 bcf vs and expected build of 75 bcf.

[BRIEFING.COM] The market has been moving in a tight range over the past hour as there hasn't been much to move the major indices in either direction following the disappointing June Payroll and jobs report from this morning.

While losses in equities are broad based, virtually across every sector, treasuries have been favored today with the 10-year Note putting in solid gains as worries that an economic recovery may take longer than expected.

[BRIEFING.COM] The major averages have drifted even lower over the past thirty minutes, with the Dow and S&P 500 both hitting session lows just minutes ago. Each of the major indices have since bounced slightly higher, but are still logging significant losses.

The S&P 500 is near the key 900 level, although it has yet to breach it. Additionally, volume has been slowing, and will likely continue to drop off ahead of the long 4th of July weekend.

[BRIEFING.COM] After a fairly busy morning in terms of economic data releases, news flow has slowed considerably, and the stock market remains solidly in the red. Losses are broad based without any sector trading meaningfully higher. For the NYSE, there are almost 12 losers for every winner.

Following yesterday's weakness, energy and retail again are two areas that are being hit especially hard. Crude oil and natural gas have both been trading with sharp losses this morning. 

[BRIEFING.COM] The S&P 500 recently came within a couple of points of the 900 level, but has since begun a gradual ascent. Still, weakness remains widespread.

Only a handful of companies are making advances this session. Among them, Elan (ELN 8.02, +1.02) is actually up considerably amid news that Johnson & Johnson (JNJ 56.22, -0.85) and Elan have reached a definitive agreement whereby Johnson & Johnson will aquire certain drug assets from Elan. Johnson & Johnson will also invest $1 billion in Elan through an affiliate.

[BRIEFING.COM] Commodities are showing broad weakness as the dollar is trading higher in early morning trade.

August crude began selling off pre-market and extended losses at the open. Crude is trading 3.8% lower at $66.66 per barrel, near session lows of $66.62.

Natural gas is tracking crude this morning and is also trading near morning lows. Currently, natural gas is 1.8% lower at $3.73 following inventory data, which showed an inventory build.

Precious metals are showing morning weakness. August Gold is 1.3% lower at $928.80 per ounce, while September silver is trading 2.9% lower at $13.37.

[BRIEFING.COM] The major indices have pulled up a bit from their morning lows in the wake of some pleasing factory orders data.

Factory orders for May increased 1.2%, which is better than the 0.9% increase that was expected and up from the previous month's 0.5% increase.

Losses in the equity market remain considerable, though.

[BRIEFING.COM] Stocks are being wacked with a wave of selling pressure. The decline is steep and broad-based as all 10 major sectors in the S&P 500 trade with losses of 1% or more.

Materials and energy stocks have encountered the worst of the selling effort. The two sectors are both down 2.5% as commodities prices come under pressure and crude oil prices slide for the third straight session. As such, the CRB Commodity Index is down 0.8% and crude oil futures are down 3.4% to $66.93 per barrel, which is its lowest point in more than one week.

U.S. stock futures are trading lower ahead of the June Nonfarm Payrolls report, which is due at the bottom of the hour. On average, economists predict that 365,000 jobs were lost in June and that the unemployment rate will climb to 9.6% from 9.4%. Weekly jobless claims are also due at 8:30 AM ET, but factory orders for May are due later this morning (10:00 AM ET). European stocks are also showing weakness as France's CAC, Germany's DAX, and Britain's FTSE all trade lower in broad-based fashion. According to the Associated Press, the seasonally-adjusted unemployment rate in the Euro zone during May came in at a 10-year high of 9.5%. The heightened unemployment rate comes amid persistently challenging global economic conditions, which have prompted the European Central Bank to leave its benchmark lending rate unchanged at 1.00%, as expected.

[BRIEFING.COM] Stocks quickly climbed markedly higher in the early going, but gradually pared their gains throughout afternoon trading. Though gains remained broad-based, the steady, downward drift made for a rather unimpressive conclusion to the month's first session.

The S&P 500 climbed 1.4% to its best level since mid-June following a barrage of economic reports, which didn't really offer much inspiration to market participants.

The ADP Employment Change report isn't always a precise indicator of what is in store with the official nonfarm payrolls report, but the ADP report does do a good job of handicapping the government's figure. So, with the latest ADP report showing a higher-than-expected the 473,000 job losses for June, many believe job losses in tomorrow's report could exceed the 363,000 that is currently being forecast.

Many economists are worried that continued weakness in labor markets and recent increases in Treasury yields could stymie a recovery in housing. According to the latest data, pending home sales for May increased just 0.1% month-over-month. They were expected to be flat after spiking 7.1% the month before.

Meanwhile, construction spending during May fell 0.9% month-over-month and missed expectations. The June ISM Manufacturing Index came in at an in-line 44.8, which means manufacturing activity continues to contract since the Index is below 50. The monthly reading was last above 50 in February of 2008. However, the pace of contraction continues to slow as the ISM has now increased six consecutive times.

Despite the generally mixed bag of economic reports, stocks were able to log broad-based gains. Consumer staples (+1.7%) were the strongest performers, thanks to General Mills (GIS 58.18, +2.16). Better-than-expected earnings and issued an upbeat forecast earned shares of GIS their best single-session advance by percent in nearly one month. The consumer staples sector made its best percentage gain in roughly two weeks.

Financial stocks were some of the session's worst performers. The sector shed 0.5% and finished at session lows as diversified banks (-0.8%) and regional banks (-1.0%) came under pressure.

Energy stocks struggled to remain in positive territory as sellers pressured the sector amid falling oil prices. The energy sector was up more than 2% at its session high, but finished with a modest 0.2% gain. Crude oil prices were also up more than 2% at their session high, but finished 0.8% lower at $69.35 per barrel. The reversal in oil prices came in the face of a larger-than-expected draw in weekly inventories.

Despite weakness in energy-related commodities, precious metals were able to advance amid a weaker U.S. dollar. Amid reports that China would like to debate proposals for a new global reserve currency at next week's G8 meeting, the Dollar Index dropped 0.6%. That helped gold prices climb 1.5% to $941.30 per ounce. The broader CRB Commodity Index climbed 0.5%.

Participation was lacking again this session as less than 1 billion shares traded hands on the NYSE. That's the least amount of trading volume in nearly three weeks. Volume is also expected to be light tomorrow since it is the week's final trading session ahead of the long weekend. U.S. markets will be closed on Friday in observance of Independence Day.