July 05, 2012 at 09:21 AM EDT
Wall St. Today - 07-05-12
Three central bank actions lead the news wire Thursday morning. The moves will be welcomed by the market, but the reasons for the actions will continue to weigh on the market’s collective conscience as well. Futures also caught a lift at 8:30, when ADP reported a stronger than expected estimate for private nonfarm payrolls. Just before trade opens, stocks were looking lower though. The SPDR S&P 500 (NYSE: SPY) was indicating lower in the premarket.
The European Central Bank (ECB) cut euro zone rates to a record low. The ECB cut a quarter-point off its main refinancing rate, bringing it to 0.75 percent. The move was expected by the market and should serve stocks. The Bank of England (BOE) said it would restart bond purchases two months after stopping the quantitative easing measure. The BOE raised its asset-purchase target by 50 billion pounds to 375 billion pounds. Finally, China surprised the market as its central bank said it would cut interest rates for the second time in one month. China’s one-year lending rate comes down by 0.31 percentage points to 6%. China’s one-year benchmark deposit rates were cut by a quarter-point to 3%.
Because of the holiday, Thursday will offer an especially busy economic report schedule. Five reports reached the wire before the bell even rang. The most important of those is the ADP Private Employment Report. The report is actually an estimate of the federal government’s data on monthly private nonfarm payrolls. ADP reported June private non-farm payrolls likely increased by 176K, beating economists’ expectations for a net addition of 95,000. ADP’s estimate marks an increase from May’s revised higher +136,000 estimate.
Challenger, Gray & Christmas’ published its monthly Job-Cut Report this morning. Challenger said announced layoffs fell in June to 37,551, down from a revised lower May mark of 61,887 (from 62,887).
The Department of Labor reported on Weekly Jobless Claims, indicating they fell to 374K in the period ending June 30, down from 388K the prior week (revised from 386K). The U.S. job market is still spoiling in my opinion.
Individual retailers will be reporting their monthly chain store sales mostly on Thursday. Recent consumer confidence and spending data has been disappointing to say the least. So, the reports could spur reconsideration within the sector and sector allocation out of it. We recently discussed 5 stocks that should benefit if consumers check out, including Dollar Tree (Nasdaq: DLTR), eBay (Nasdaq: EBAY), Wal-Mart (NYSE: WMT), Amazon.com (Nasdaq: AMZN) and Cash America (NYSE: CSH).
The fifth data point to reach the wire Thursday was the Mortgage Bankers Association (MBA) data on mortgage application activity. This week’s report covering the week ending June 29 showed the Market Composite Index of activity fell 6.7%, driven by an 8.0% drop in refinancing activity. Purchase activity, or applications tied to the purchase of homes, rose 1.0%. Rates are still low, but money is also still hard to come by, so we continue to have low expectations with regard to housing.
At 9:45 AM, the Bloomberg Consumer Comfort Index will offer the latest take on the consumer mood. Last week’s report showed deterioration, as the comfort index improved 1.8 points, to negative 36.1.
At 10:00 AM, ISM posts its latest Nonmanufacturing Index, a measure of the nation’s service sector. It’s the most important part of our economy, making up approximately 90% of our economic production. Economists expect the reading for June to show deterioration to a mark of 53.0, down from 53.7 in May.
Both the EIA’s Petroleum and Natural Gas Reports will be published Thursday this week due to the holiday. At 10:30, the EIA publishes its Natural Gas Report. Last week, it showed working gas in storage increased by 57 Bcf, which was higher than last year at this time and above the five-year average. At 11:00 AM, the EIA reports on Petroleum Status. Crude oil decreased by 0.1 million barrels, and inventories were above the upper limit of the average range for this time of year.
The earnings schedule for Thursday includes reports from Ambow Education (Nasdaq: AMBO), Bassett Furniture (Nasdaq: BSET), China Technology Development (Nasdaq: CTDC), Imperial Holding (NYSE: IFT), International Speedway (Nasdaq: ISCA), Ixia (Nasdaq: XXIA), NewLead Holdings (Nasdaq: NEWL), Pansoft (Nasdaq: PSOF), Roberts Realty (NYSE: RPI), US Geothermal (NYSE: HTM) and Xyratex (Nasdaq: XRTX).
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