12 Reasons Markets Were Hot Until Yesterday’s Jobs Report

Dow 12,657 S&P500 1,343 Nasdaq 2,859 Gold 1,542 Oil 96

The Dow (NYSE:DIA), S&P (NYSE:SPY), and Nasdaq (NASDAQ:QQQ) scored another week of wins following the Fourth of July. Oil (NYSE:USO) caught a small bid. Gold (NYSE:GLD) and Silver (NYSE:SLV) got a big boost on the week.

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Now, for the 12 reasons markets moved this week:

Tuesday

1) Portugal may be the new Greece. Moody’s cut Portugal’s credit rating by four levels to Ba2, two notches into junk territory. Moody’s says Portugal will need a second bailout, like the one currently being planned for Greece, before it can return to capital markets.

2) May factory orders. This data may have been the one bright spot in a gloomy day of trading, and along with energy sector gains, one of the only reasons markets weren’t as bad as they could have been. New orders for manufactured goods rose $3.5 billion in May, or 0.8%, to $445.3 billion after decreasing 0.9% in April.

3) Poor financials. Stocks dropped today for the nation’s biggest financial firms: JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Citibank (NYSE:C), Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS), and just about every other financial stock trading on the NYSE. And when the banks have a bad day, everyone has a bad day. The New York Stock Exchange’s gainers were roughly even with decliners in today’s trading.

Wednesday

1) EU speaks out against ratings agencies. After Moody’s (NYSE:MCO) downgraded Portugal yesterday, pushing up European bond yields and hurting markets, EU officials are speaking out against American ratings agencies they say don’t know enough about European affairs and are inherently biased. Officials are trying to downplay the ratings to minimize their impact on investor opinion, and say recent downgrades are only hurting their efforts to deal with debt issues.

2) ISM Non-Manufacturing Index. While the latest report on the non-manufacturing industry doesn’t show as much growth as May, dropping 1.3% in June, the index still remained above 50%, indicating that the sector is still expanding. This data, as well as jobs data being released Thursday and Friday, is distracting investor attention from negative reports like Chinese (NYSE:FXI) rate hikes and continuing Euro-debt issues. Markets even moved in contradiction to financial stocks (NYSE:XLF), which were significantly down today. 

3) Last week’s gains. Last week was filled with positive news that had the markets up consistently for five straight days, including growth in the ISM Manufacturing Index, housing price data for April, Greece’s passing of new austerity measures and the EU introducing a plan for a second Greek aid package. Last week’s optimism carried through to this week as investors hope for the continued improvement of both Europe’s and the U.S.’s economic woes.

Thursday

1) Initial jobless claims report. According to today’s report, initial jobless claims fell 14,000 last week, bring the 4-week merging average to a decline of 3,000 from the previous 4-week period. Also released today was Automatic Data Processing’s June jobs survey, which found that 157,000 private-sector jobs were created last month, well above expectations of less than 100,000 new jobs. 

2) ECB remains strong. The European Central Bank raised its lending rate today by 25-basis points to 1.25%, reiterating the bank’s intent not to allow Greece, Portugal, or any other troubled nations to go into default, boosting investor sentiment. The ECB also announced that it would relax some credit rules for Portugal, allowing the country more freedom in handling its debt crisis.

3) Retail. Same-store sales were up in June, pushing the S&P Retail Index up 2.36% today along with national chains like Target (NYSE:TGT), Gap Inc. (NYSE:GPS), Limited Brands Inc. (NYSE:LTD), and Macy’s (NYSE:M). The sector led today’s gains on the NYSE where advancers outnumbered decliners three-to-one.

Friday

1) Jobs report. Jobs report. Jobs report. Did I mention jobs report? The Bureau of Labor Statistics released their monthly jobs report this morning, which showed next to no job growth in June, and actually showed that unemployment had increased by 545,000 since March. The report also showed that May’s job growth, originally reported at 54,000, was really less than half that figure. For that reason, the Dow (NYSE:DIA), S&P (NYSE:SPY), and Nasdaq (NASDAQ:NDAQ) all dropped about 1% this morning, though they have recovered somewhat since then.

2) Conglomerate stocks took a hit. Big conglomerate stocks with high trading volumes like General Electric (NYSE:GE), Emerson Electric (NYSE:EMR), Tyco International (NYSE:TYC), United Technologies Corp. (NYSE:UTX), and Textron Inc. (NYSE:TXT) all suffered major losses on the markets today. The best faring of the five was Textron Inc., shares of which were down 0.68% today. The five heavily traded stocks all trade on the NYSE, helping to bring down the whole index, where decliners outnumbered advancers today, two to one.

3) Capital goods weighed down the markets. Capital goods stocks were also a heavy weight on the NYSE, with Honeywell International (NYSE:HON), Cummins Inc. (NYSE:CMI), Caterpillar (NYSE:CAT), Deere & Company (NYSE:DE), and even Boeing (NYSE:BA) all down 1% to 2%. The one bright note is that BA, DE, and CAT are all recovering somewhat in after-hours trading.

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