Dow -124.20 at 12772.47, Nasdaq -38.79 at 2937.33, S&P -12.90 at 1354.68
Although stocks closed lower by 0.9% today, they finished the week less only about 0.6% below last Friday's close. After trading substantially lower on the disappointing employment data this morning, and drifting lower throughout the day, stocks managed so show some improvement in the final hour.
The biggest factor in today's trade was the disappointing employment data. June nonfarm payrolls came in at 80K vs. the 100K Briefing.com consensus. The unemployment rate was reported at 8.2% vs. the 8.2% Briefing.com consensus. Futures saw an immediate downside reaction to the weaker than expected data, and recovery attempts since then have been limited.
In U.S. corporate news, Seagate Technology (STX 24.95, -0.12) finished lower by 0.5% after it issued disappointing guidance for its fiscal fourth quarter. Peer Western Digital (WDC 31.02, +0.34) closed higher by more than 1% after a late-day rebound... Informatica (INFA 31.39, -11.98) is down by 28% after it issued downside second quarter guidance, citing a changing macroeconomic environment in Europe... In other news, Deutsche Bank (DB 33.65, -1.79) finished lower by 5% following reports that a German financial regulator is looking into the company with regard to Libor.
Technology was the worst performing sector, down 1.5% vs. the broad market decline of 0.9%, with the Informatica and Seagate warnings weighing. Materials, Industrials and Energy also underperformed. Defensive sectors such as Utilities and Staples outperformed, with losses of 0.1-0.2% on the day.
Overnight, Chinese stocks rose 1% on the central bank easing there. However, outside of China, other Asian markets had a lackluster response. There was weakness in Japanese stocks, with the Nikkei falling 0.7%, while Hong Kong saw a flat close in its equity market. Comments from Japan's Finance Minister, who suggested the government could run out of money as soon as October if a bond bill is not passed, may have also weighed on Japanese stocks.
European markets moved lower on the U.S. jobs data too, finishing with sizable losses. Germany's DAX closed down 1.9% while the UK's FTSE is flat. Spanish bond yields rose back toward the 7.0% level. Spain's 10-year yield is +24 basis points to 6.93% this morning, while Spain's IBEX is the worst performing European index today, down 1.5% vs. a 0.3% decline in the STOXX 600.
Looking back at the rest of the week, we'd note that it started with the return of ‘Merger Monday' with 4 major deals announced. Bristol-Myers Squibb (BMY 36.00, +0.05) announced it would acquire Amylin (AMLN 30.07, +2.50) for $31.00/share in cash, representing an aggregate purchase price of ~$5.3 bln and 10% premium to Friday's closing price for AMLN. Dell (DELL 12.56, -0.07) announced it would acquire Quest Software (QSFT 27.86, -0.02) for $28.00/share confirming months of speculation, representing a slight premium to Friday's closing price. Ingram Micro (IM 17.01, -0.14) announced it will acquire Brightpoint Inc. (CELL 8.89, +3.48) for $9.00/share representing a 66% premium to Friday's closing price for CELL. Finally, Germany's Linde Group will acquire Lincare Holdings (LNCR 41.36, +7.34) for $41.50/share in cash, which was a 22% premium to Friday's close. The S&P inched out at 0.3% gain on Monday.
Tuesday there was an early close in the markets due to the Independence Day holiday on Wednesday. The S&P managed to rise 0.6% following better than expected report on factory orders in the US. The energy sector was the biggest outperformer, gaining 2.4% alongside strength in crude oil, which surged 4.6% following more reports stating that delivery of mlns of barrels of crude oil from Iran to China may be at risk following freight dispute.
On Thursday, the S&P fell 0.5% despite three major central banks taking action to help economic growth. China cut interest rates for the second time in a month as its benchmark rate dropped 25 bps to 3.0%. The ECB cut its benchmark rate by 25 bps to 0.75%, but fell short of announcing any further LTRO programs. The BoE increased it's asset purchase program by GBP 50 bln in a move that had been telegraphed by members for the past two weeks. Finally, Retailers reported June Same Store Sales. Overall June results came in below expectations with fourteen retailers missing estimates—the most since May of last year (six companies beat).
Next week, the focus shifts to earnings season, with Alcoa (AA 8.66, -0.25) reporting results Monday afternoon. Alcoa is down 3% this morning, after Nomura cut its Q2 earnings estimates ahead of Monday's report, citing a weaker aluminum market.
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