On the whole, the week ending August 6 was far from smooth, though it began promisingly enough. Markets moved strongly upward at the start of the week, finishing above their 200-day moving average for the first time since June. Positive data from the ISM Manufacturing Index helped to build confidence.
However, typically mixed economic data began to sour moods by the middle of the week. A better-than-expected July ISM Service Index of 54.3 was effectively offset by a worse-than-expected 1.2% drop in June factory orders, a drop in pending home sales for June, and stagnant personal income and spending numbers for the same month.
A reported increase in private payrolls for July had no effect after news came in that initial jobless claims for the week ending July 31 hit a three-month high of 479,000. On Friday, negative sentiment was reinforced by the US federal government’s report that 131,000 nonfarm positions disappeared in July, well above a projected loss of 87,000 jobs. Overall unemployment, however, remained static at 9.5%–in part because many have given up looking for work.
Sellers took over the market on Friday–though a late recovery ultimately pushed stocks back above the 200-day average. Some strength was visible in building products, life science tools and restaurants.
Large numbers of retail investors clearly remain anxious about re-entering the stock market as economic conditions continue to weaken and additional corrections appear imminent. Depressed trading volume clearly reflects this.
Corporate earnings continue to defy expectations, but their influence has been weakened significantly. Pfizer, Kraft, and Mastercard all issued robust numbers.
Another significant event came in the form of Fannie Mae’s earnings report, with the government-backed mortgage giant reporting a net loss of $1.2 billion in the second quarter of 2010–infinitely more reassuring than its net loss of $11.5 billion in the first quarter. Net revenue was $4.5 billion, up 49 percent from $3.0 billion in the first quarter of 2010. A jump in net interest income and shrinking credit-related expenses helped to bolster the company’s numbers.
The Dow Jones lost 21.42 points to close at 10,653.56 (-0.20%), while the S&P 500 was off 4.17 to finish at 1,121.64 (-0.37%). The NASDAQ dropped 4.59 points to finish at 2,288.47 (-0.20%).
In Europe, the FTSE dropped 33.39 on US jobs data to settle at 5,332.39.
In Asia, Shanghai added 37.64 to end the day at 2,658.39 (+1.44%). The Hang Seng also had a strong performance, rising 127.08 (+0.59%) to close at 21,678.80. The Nikkei 225 bucked the trend, however, dropping a modest 11.80 (-0.12%) to settle at 9,642.12.
The euro gained 0.0120 against the dollar, finishing at 1.3276 (+0.91%). The dollar dropped to $85.45
(-0.45%) against the yen. The yield on the US Treasury’s 10-year bond fell to 2.82%.
Oil rose 0.15 cents to close at $80.55 per barrel, while gold added $2.25 to finish at 1,205.90 (+0.19%) per ounce.
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The ARTS Team
About: Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com
Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac.
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