MarketView for June 24

Summary  

It was another grim day on Wall Street where worry took precedence over common sense with the end result being that the S&P 500 ended the day in the red for the fourth consecutive trading session. Concerning traders and investors alike were what was considered to be continual weakness in consumer spending, both current and future, combined with over done concerns over the potential for some stringent financial regulation.

The S&P 500 has fallen 3.8 percent over the past four trading days, with retail stocks being among those hurt the worst. In bearish technical signs, the S&P fell below its 14-day moving average and breached the 1,083 level, a key retracement of the slide from its 2010 high in April to the year's low on May 25. Some expected stocks to rebound after a few days in which the market fell on higher volume, a sign of institutional selling known as distribution days.

Driving the poor attitude towards retailers were the somewhat discouraging outlooks from Bed Bath & Beyond and Nike. Nike ended the day down 4 percent at $69.95, while Bed Bath & Beyond fell 5.7 percent to $39.07.

Meanwhile, banks were pressured by fears Congress would pass stringent rules in an overhaul of financial regulations. Lawmakers were on the verge of adopting a bill that could restrict banks' trading and investment activities, crimping their profits. JPMorgan Chase fell 2.2 percent to $38.03, while Bank of America was down 2.7 percent at $15.02.

A drop in initial jobless claims and a rise in a gauge of long-lasting manufactured goods failed to offset recent weak economic data.

Computer chip manufacturers, as measured by the Philadelphia semiconductor index .SOXX, were off 2.9 percent. Six semiconductor companies, including Micron Technology have agreed to pay $173 million to settle U.S. antitrust lawsuits accusing them of conspiring to keep computer chip prices artificially high. Micron ended the day down 2 percent at $9.62.

Dell was down 6.4 percent to close at $12.93. The company said it was focused on improving profitability and diversifying, but investors expressed doubts about the company's turnaround plan. At the same time, Oracle rose 3.9 percent to $23.08 in extended trading on Thursday after it reported adjusted fourth-quarter earnings that exceeded expectations.

Research in Motion fell 4.7 percent to $55.80 in afterhours trading as shipments and subscriber growth fell short of expectations in the first quarter. BP still has both Gulf and share price troubles, as its shares fell 3.1 percent to $28.74, while at the same time hitting a 52-week low in intraday trading. 

Pfizer was down 2.8 percent to $14.46 after it suspended clinical trials of its experimental arthritis drug. On the upside, Hasbro gained 4.9 percent to $43.14 after a news report that the toy company was in negotiations for a possible leveraged buyout, a report the company denied.

Economic Data is Generally Positive

New claims for unemployment benefits fell last week while a closely watched gauge of demand for factory goods rebounded in May, offering assurance the economy's fragile recovery remains intact. Thursday's data, coming in the wake of reports indicating a moderation in the pace of recovery, suggested the economy was not at risk of slipping back into recession.

According to the Labor Department, new claims for unemployment benefits fell by 19,000 claims to 457,000 claims last week. The drop was the largest since mid-April. Nonetheless, the economic recovery continues to be hamstrung by stubbornly high unemployment. The weak jobs market is holding back demand even though manufacturers continue to ramp up output and businesses have stepped up capital spending.

Last week, the four-week moving average of new claims -- considered a better measure of underlying labor market trends -- fell 1,500 to 462,750. Claims continue to be stuck at a stubbornly high level, implying unemployment will remain a problem for a while yet as was evident from Wednesday’s assessment by the Fed as it toned down its assessment of the economy, describing the recovery as "proceeding" and the labor market as "gradually improving." It noted employers remained reluctant to add employees.

Meanwhile, in a separate report, the Commerce Department said orders for durable goods excluding transportation equipment rose 0.9 percent last month, reversing April's 0.8 percent decline. However, a steep drop in the notoriously volatile commercial aircraft component pulled down overall durable goods orders by 1.1 percent, making it the first decline in six months.

Non-defense capital goods orders excluding aircraft, a proxy for future business spending, rebounded 2.1 percent in May after a 2.7 slide in April, the durable goods report showed. Inventories of durable goods, items meant to last three years or more, were up 0.8 percent, the fifth monthly rise in a row. Unfilled orders rose 0.2 percent after a 0.4 percent gain in April.