Stocks Post Another Weekly Loss on Labor Market and Sovereign Debt Woes.

Published on Saturday, 06 February 2010 09:46 Written by TradersHuddle Staff

Weston, Feb 6^th (Tradershuddle.com) – Stocks fell for the week, after tepid labor market reports and concern on sovereign debt in euro zone sparked investor fears that the economic growth may falter. The Dollar surged to an 8-month high, pummeling crude oil and other commodities.

For the week, the Dow lost 0.55%, while the S&P 500 index fell 0.72% and the NASDAQ slid 0.29%.

The market started the week to the upside, rebounding from the biggest monthly decline in nearly a year. Stocks moved higher from the open as global stocks rallied on good manufacturing reports in Asia and Europe. At 10 am, stocks received an additional boost after the Institute for Supply Management reported its ISM manufacturing index, which jumped more than expected in January to 58.4.

Energy stocks were among the day's biggest gainers after Dow component Exxon Mobil (NYSE:XOM) reported its profit fell 23% but still beat Wall Street estimates and oil pushed higher to nearly $75 a barrel. Industrials were another strong performer today, with Alcoa (NYSE:AA), leading the Dow Jones Industrial Average, after a stronger-than-expected ISM manufacturing report.

Meanwhile, the Dollar snapped a four-day winning streak as good economic data spurred demand for risk, as the euro rebounded from a 7-month low versus the greenback.

Crude oil surged as manufacturing in the U.S. increased at the fastest pace since August 2004, signaling that fuel demand will gain. The contract for March delivery climbed $1.54 to settle at $74.43.

On Tuesday, stocks finished higher, posting their second straight gain, after encouraging earnings reports, pending home sales, and solid auto sales.

The market started the trading session to the upside as the bellwether for the U.S. economy, UPS (NYSE:UPS), reported earnings that narrowly beat estimates and projected a jump in profit for 2010. Mid morning, stocks solidified their advanced after the National Association of Realtors reported an increase of 1% in their pending home sales index, an increase which was in line with expectations. The index fell 16.4% in the previous month.

Major automakers, including Ford Motor (NYSE:F), reported improved January sales, which helped the bullish mood. However, Toyota (NYSE:TM), which earlier this month recalled millions of cars due to a faulty gas pedal, saw a bigger-than-expected decline in January sales.

Among 10 key S&P sectors, health care was the biggest gainer, followed by industrials and consumer discretionary as traders placed some recovery bets. Homebuilders also finished strong after the pending-home sales report and a strong earnings report in the sector helped propel the move.

Crude oil rallied as the Dollar weakened and on optimism that fuel demand will increase with global economic growth. The contract for March delivery gained $2.80 to settle at $77.23.

Mid week, most stocks fell as the 2-day rally lost steam, after a weak reading in the services sector of the economy and mixed labor market reports unsettled investors.

Stocks were under pressure for most of the trading session as the economic news was less encouraging, taking the air out of the rally. The ISM said its non-manufacturing index, which measures the strength of the services sector, rose to 50.5 in January from 49.8 in December. The move over 50 signals growth and was encouraging but economists were expecting a little better reading, especially considering the robust readings in the manufacturing side of the economy.

The labor market reports were mixed, with the ADP reporting that 22,000 jobs were lost from private payrolls in January, and Challenger, Gray & Christmas saying US employers announced last month plans to lay off more than 71,000 workers, the first time since last July that planned job cuts rose. Both reports were being closely watched by Wall Street ahead of Friday's jobs.

The Dollar gained against the euro and the yen, pressuring Dollar traded commodities.

Crude oil fell after an Energy Department report showed a bigger-than-forecast increase in stockpiles as refineries idled units and imports climbed. The contract for March delivery fell 0.3%, to settle at $76.98 a barrel.

And Treasury prices tumbled, raising the yield on the 10-year note to 3.70% from 3.64% late Tuesday.

On Thursday, stocks took a beating on concern that out of control sovereign debt, particularly in the euro zone, and an unexpected increase in jobless claims will derail the global economic recovery.

The Dollar surged to a seven month high against the euro, pummeling Dollar denominated commodities and sparking a global sell-off. Investors were concern that sovereign debt in Portugal, Spain and Greece is out of control, with investors doubting the ability of those countries to get a handle on its deficits.

Before the market opened, the Labor Department’s report on weekly jobless claims added fuel to the sell-off as initial jobless claims rose by 8,000 last week. The report was weaker than expected, as economists were estimating a drop of 10,000.

Every sector was hit hard, material stocks and financials in particular were among the biggest losers. 29 of 30 Dow components posted declines, with Cisco Systems (NASDAQ:CSCO) posting the only advance in the blue chip index. Cisco reported better than expected earnings and increased its outlook. The networking giant is optimistic that we have entered a new stage in the economic recovery, where business spending will increase, as projects that were put on hold during the height of credit crisis are now ready to start.

On the other hand Bank of America (NYSE:BAC) led the Dow Jones Industrial Average lower as shares of the biggest U.S. lender plunged 5.02% to $14.75. The bank shares were heavily hit as New York Attorney General filed civil charges against the bank and former CEO Ken Lewis, alleging they misled investors over Merrill Lynch during the acquisition last year.

The yen strengthened against all major currencies on speculation that investors will sell risky assets and unwind the carry trade as they flock to safe haven assets.

Crude oil tumbled, with the contract for March delivery falling $3.84 to $73.14 a barrel.

At the end of the week, stocks erased their early losses, rebounding after consumer credit dropped less than expected and speculation mounted that the European Union may announce a solution to solve Greece’s and Spain’s deficit problems.

The market had started weaker on economic woes as the labor picture in the U.S. is improving, but at a slower pace than expected. Before the market open, the Labor Department reported its January employment figures. The report was weaker than expected, as it showed employers cut 20,000 jobs in January, while unemployment fell to 9.7%. Economists were expecting payrolls to increase by 5,000 last month and for the unemployment rate to tick up to 10.1%.

Stocks moved to the downside, with the Dow trading below 10,000 for much of the session, until a late surge of more than 160 points put the blue chip index above the 10,000 level and in positive territory.

The tech heavy NASDAQ posted the biggest upward move, as investors scooped shares in the sector heavily hit during the 2 day sell-off. Cisco Systems (NASDAQ:CSCO) led the Dow Jones Industrial Average, a day after the company reported better than expected earnings and upgraded its outlook for the year.

The Dollar strengthened against the euro to its highest level since May, as the debt woes in the euro zone kept the euro under pressure. Traders increased their bets that the decline will continue into next week. Crude oil tumbled to a seven-week low as the greenback surged on speculation European governments will struggle to fund deficits, reducing economic growth and fuel demand. The contract for March delivery declined $1.95 to $71.19 a barrel.

Treasury yields fell as the weaker than expected jobs report, prompted investors to buy the safety of the Government debt. The yield on the benchmark 10-year note dropped five basis points to 3.56%.

There were big swings in the market during Friday’s trading session, with trading in a 170 point range in the Dow, which it actually rally 167 points from the lows in the last hour of trading. The S&P 500 actually bounced off the 200 day exponential moving average, which served as a good support area for the dramatic turnaround.

The market continues to be hostage of the strong Dollar and the weak euro that affected the intraday action and added to the volatility in the marketplace. After the big sell-off technically the market is broken and we will now measure the bounce towards the 1,100 area.

Despite Friday’s volatility and intraday erratic price action, traders got a textbook reversal and nice reference points to trade for the long side.

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