Thursday’s Mid-Day Movers: 3 Stories Driving Markets

The major stocks were plunging Thursday following the Federal Reserve’s assertion that bond buying may be scaled back. As of 12 p.m.:

DIJA: -1.28% to 14919.10 S&P 500:  -1.40% to 1606.10 NASDAQ: -1.44% to 3393.45
Gold: -5.99% to 66.02 Oil: -2.81% to 22.16 U.S. 10-Year: +3.81% to 23.99

Here are three stories helping shape the market Thursday afternoon.

1. China and the Euro Zone: A Threat to U.S. Economic Recovery? Factory output in China, the world’s second largest economy, weakened to a nine-month low in June — which, together with the continued recession in the euro zone, could threaten the global recovery led by the United States. The data showing China’s economy was wobbling came just one day after the Federal Reserve indicated that the U.S. economy was firmly on a recovery path, so firmly, in fact, that the central bank has considered ending its financial stimulus.

Faltering demand drove the flash estimate of the HSBC China Purchasing Manager’s Index, a private survey of Chinese manufacturers, down to 48.3 in June from 49.2 the previously month, indicating further contraction in that sector… (Read more.)

2. Is Manufacturing a Dark Spot for the Labor Market? Economists and market participants often use regional outlook reports produced by local Federal Reserve branches to inform their perception of national economic conditions. When the data align, observers can more confidently form expectations about future conditions — in manufacturing, for example, national indicators suggest (at best) modest growth, and several regional indicators confirm this outlook.

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On Thursday, the Federal Reserve Bank of Philadelphia released the June update to its Business Outlook Survey. The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -5.2 in May to 12.5 in June, its highest reading since April 2011. The percentage of firms reporting increased activity rose from 22 to 34 on the month, with several other indicators rising from negative to positive territory…(Read more.)

3. Jobless Claims Rise, But No Need to Sound the Alarm: Forecasts made by the Federal Open Market Committee show the economy must cross some important hurdles before arriving at the necessary criteria for slowing bond purchases. Federal Reserve officials estimate the economy will grow 3 percent to 3.5 percent next year, pushing the unemployment rate down to 6.5 percent to 6.8 percent from May’s 7.6 percent.

Initial claims for unemployment benefits, which act as a proxy for layoffs, are a good measure of the health of the economy, and, as Deutsche Bank economist Brett Ryan told Reuters, “Where jobless claims are right now should tell you that the economy is doing okay, that it’s on a decent path”… (Read more.)

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