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Stock Market News for May 3, 2012

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Lower-than-expected private sector hiring spooked investors and dragged the benchmarks lower yesterday. In addition, new orders for U.S. factory goods declined by its highest margin in three years and factory activity contracted yet again in the Euro zone.

The Dow Jones Industrial Average (:DJI) slipped 0.1% to settle at 13,268.57. The Standard & Poor 500 (S&P 500) declined by 0.3% and closed yesterday’s trading session at 1,402.31. However, the tech-laden Nasdaq Composite Index managed to end in the green, gaining 0.3% to finish at 3,059.85. The fear-gauge CBOE Volatility Index (:VIX) edged up 1.7% to settle at 16.9. Consolidated volumes on the New York Stock Exchange, the Nasdaq and the American Stock Index were 6.4 billion shares, lower than the daily average of roughly 6.76 billion. For every three stocks that moved down on the NYSE, only a couple of stocks could close in the green.

This decline comes just a day after the Dow reached its highest point since late 2007. Among the 30 Dow components, only 14 managed to end in positive territory but none managed robust gains. Intel Corporation (NASDAQ:INTC) led the advancers with modest gains of 0.8% followed by The Home Depot, Inc. (NYSE:HD), Procter & Gamble Co. (NYSE:PG), and Caterpillar Inc. (NYSE:CAT), which gained 0.7%, 0.6% and 0.5%, respectively. On the other hand, the declines were much larger and included the likes of Alcoa, Inc. (NYSE:AA), Bank of America Corporation (NYSE:BAC), Chevron Corporation (NYSE:CVX) and JPMorgan Chase & Co. (NYSE:JPM) and they plunged 2.4%, 1.8%, 1.2% and 1.4%, respectively.

While encouraging economic data helped benchmarks to soar on Tuesday, Wednesday’s declines were sparked off by concerns over dismal reports. The Automatic Data Processing, Inc.’s (NASDAQ:ADP) National Employment Report stated that U.S. nonfarm private business sector added only 119,000 jobs in April, far lower than expectations of an addition of 177,000 jobs. According to the report: “Employment in the private, service-providing sector increased 123,000 in April, after rising 158,000 in March. Employment in the private, goods-producing sector declined 4,000 jobs in April. Manufacturing employment dropped 5,000 jobs, the first loss since September of last year”.

Meanwhile, jobs numbers for March was modestly revised downward from 209,000 to 201,000. Market expectations took a downturn and investors expect nonfarm payroll data to show additions of 125,000 to 150,000 jobs as against 170,000 job additions estimated by Reuters.

Markets were also jolted by data from across the Atlantic, which painted dismal picture of the labor market and factory activity. Data suggested that unemployment in the Eurozone has touched its highest level in 15 years, soaring to 10.9% in March. In 1997, the unemployment rate in the region had hovered around 10.95% for the months of February, March and April. Separately, the Manufacturing Purchasing Managers’ Index (PPMIQ) declined to 45.9 in April from March’s reading of 47.7. The index has now reached its lowest point since June 2009.

Coming back to the domestic front, new orders for U.S. factory goods declined by its highest margin in three years. According to the U.S. Department of Commerce, new orders for manufactured goods in March declined 1.5% to $460.5 billion. This drop was higher than consensus estimates of a decline of 1.6%, but reversed February’s increase of 1.1%.


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