MarketView for July 3

Summary 

The three major equity indexes were volatile on thin trading volume, with some market participants already away before Thursday's Independence Day holiday. The equity markets closed at 1 p.m. Thney will reopen on Friday for a full session.

Mixed data on Wednesday failed to give the market solid direction. Private-sector employers stepped up hiring in June and weekly jobless claims fell, but the growth rate in the services sector slowed in June and the trade deficit widened on a drop in exports.

Equities in Europe and Asia were pressured by signs of slowing growth in China and deepening political turmoil in Portugal, where talks over the government's future threatened to reignite the euro-zone crisis.

The S&P 500 is down 3.2 percent from its May 21 record closing high of 1,669.16. The benchmark index has been unable to close above its 50-day moving average since June 20.

Large-cap tech stocks were among the strongest of the day, helping the Nasdaq. Cisco rose 1.1 percent to $24.59 while Oracle gained 2 percent to $30.70.

Crude oil prices rose 1.6 percent to $101.18 a barrel after hitting a 14-month high above $102 a barrel on a sharp decline in crude stockpiles in the United States and political unrest in Egypt.

Health providers were in focus after the Obama administration said it wouldn't require employers to provide health insurance for their workers until 2015, delaying a key provision of the healthcare reform law by a year.

Tenet Healthcare fell 4.3 percent to $43.64. Universal Health Services was down 3.5 percent to $65.82.

About 3.37 billion shares changed hands on three major equity exchanges. The full trading-day average volume has been about 6.4 billion so far this year.

Jobs Data Up

According to the ADP National Employment Report, employers stepped up hiring in June and new applications for unemployment benefits fell for a second straight week last week, pointing to improving labor market conditions. Specifically, ADP reported that payrolls increased by 188,000 jobs last month. By comparison, 134,000 jobs were added in May.

In a separate report, the Labor Department said initial claims for state unemployment benefits fell by 5,000 claims to a seasonally adjusted 343,000 claims. The more accurate four-week moving average of new claims, which is considered a better measure of labor market conditions, fell by 750 claims to 345,500 claims. The reports come ahead of the government's more comprehensive employment report on Friday.

In another sign of improving domestic economic conditions, The Commerce Department reported that the trade deficit widened sharply in May, as stronger demand brought in more imports. At the same time, falling demand abroad pushed exports lower. The end result was an increase in our trade deficit of about 12 percent to $45.0 billion from a revised $40.1 billion in April, the largest month-to-month increase in two years.

While the widening of the trade gap could prompt analysts to lower their estimates of second-quarter growth, the rise in imports points to firming underlying demand in the economy. Imports rose 1.9 percent to $232.1 billion, the highest since the record level of $234.3 billion set in March 2012. May imports, when adjusted for inflation, were a record $167.2 billion, the department said.

Service Sector Growth Down

The pace of growth in the services sector slowed in June to its weakest level in over three years as new orders nearly stalled, though a jump in employment provided an encouraging sign for the labor market.

The Institute for Supply Management reported on Wednesday that its services index fell to 52.2 last month from 53.7 in May, short of economists' forecasts for a gain to 54. While a reading above 50 indicates expansion in the sector, June's decline brought growth to its lowest level since February 2010.

A slowdown in new orders offered little optimism for the growth outlook. The index tumbled to 50.8 from 56, making for the lowest level since July 2009, just a month after the recession ended.

But employment was a bright spot, with the gauge climbing to 54.7 from 50.1. That boded well ahead of Friday's closely watched employment report from the Labor Department.

Exports contracted to 47.5 from 50, though orders for imports fared better, rising to 53.5 from 49.5.

Growth in the vast services sector has been more resilient than its manufacturing counterpart in recent months and has stayed in expansion territory since the start of 2010. Still, the services index is nearly 4 points below this year's high of 56, which was hit in February.