MarketView for August 4

Summary  

Ok, so unless you have been off the planet temporarily you have by now heard that it was less than an ebullient day on Wall Street. At the same time, it was not nearly as bad as many in the media, along with those self-proclaimed prognosticators of Wall Street, would have you believe. Yes, in absolute numbers it was the worst stock-market selloff since the middle of the financial crisis in early 2009.

And yes, it can correctly be labeled a full-fledged market correction because the S&P 500 index is down more than 10 percent from its April 29 high. But so what! This is the time when you should be digging out that list of stocks you have wanted to own but at a lower price.

When the Dow Jones industrial average and the S&P 500 indexes fall just over 4 percent, as they did on Thursday, and the Nasdaq lost 5 percent on fear the United States is staring at another recession and that Europe's sovereign debt crisis is swallowing two of its largest economies, that is the time when you should consider picking up bargains. Yet many were only interested in seeking safety in two-year Treasury notes, thereby sending yields to a record low.

Approximately 13.92 billion shares changed hands on the major exchanges on Thursday, the highest since June 25, 2010, and well above the daily average of around 7.48 billion shares. That also made it the busiest trading day in more than a year.

The market's recent malaise stems from a number of factors. Economic data has been disappointing, suggesting slowing growth from already sluggish pace in the first half. Europe's sovereign debt crisis has defied remedies and threatens to engulf large euro-zone economies Spain and Italy.

And there is the issue of the Japanese Yen, which has become too strong for the likes of the Japanese government since it hurts their exports. Specifically, the European Central Bank signaled it was buying government bonds in response to a deepening European debt crisis, while In Japan, the government intervened in currency markets to stem recent gains in the yen.

Losses occurred in all sectors. Among stocks hitting new 52-week lows were Bank of America, down 7.4 percent at $8.83, Citigroup, down 6.6 percent at $34.81, and Hewlett-Packard, down 5.1 percent at $32.54. Among sectors, losses in energy and materials outpaced others, with S&P energy down 6.8 percent and materials down more than 6.6 percent.  Domestic sweet crude futures settled down $5.30 to $86.63 a barrel in New York. And it was no surprise that the CBOE volatility index was up 35.4 percent to 31.66, its highest since July 2010. It was also the largest single day increase since February 2007.

On Friday the government releases July's payrolls report, a closely watched number to gauge the economy.

Economic Data Indicates Road to Recovery

The number of new unemployment claims was steady last week and heavy discounting lifted sales at retailers in July, hopeful signs that the economy is not as bad off as many would have you think. According to a report released by the Labor Department on Thursday morning, initial claims for jobless benefits edged down by 1,000 claims to 400,000 claims.

Jobless claims are hovering around 400,000 and need to break decisively beneath that level to signal a sustainable improvement in the labor market. The four-week moving average of claims, considered a better measure of labor market trends, fell to its lowest level since mid-April.

There was also more encouraging news for the economy, whose growth pace stalled in the first half of this year. Retailers, including Limited Brands and teen apparel chains Hot Topic and Wet Seal, reported healthy monthly sales increases in July as deep discounts and unusually warm weather lured shoppers to malls. Twenty-five retailers tracked by Thomson Reuters reported a 4.4 percent gain in July sales at stores open at least a year, just above expectations of a 4.3 percent rise.

But the reports failed to ease investors' fears over the stalled recovery, which were exacerbated by Europe's inability to tame its spreading debt crisis.

The claims data comes a day before Friday's release of the government's comprehensive employment report for July, which will be scrutinized for signs of how quickly the economy can regain its momentum.