MarketView for May 5

Summary 

It was another down day on Wall Street on Wednesday as more signs emerged that the contagion resulting from the monetary and fiscal crisis in Greece could make its way to other countries within the EU. As a result, the euro hit a 14-month low as the debt of weaker euro zone fell in price and there was a run on to buy safe-haven U.S. Treasury securities, sending the dollar higher. At the same time, on Wall Street, resource and industrial stocks, sensitive to the outlook of global economic growth, weighed on the market. Energy shares were also pressured as the price of oil fell nearly $3 to $79.97 per barrel.

Trading volume was among the highest this year, and while losses on the major indexes were only moderate, the overall market tone was decidedly bearish. On the New York Stock Exchange four stocks fell for every one that rose.

European leaders warned the debt crisis could spread beyond Greece, and Moody's Investors Service said Portugal could be next to have its debt downgraded, stoking fears that the contagion effect could cause complicated international debt arrangements to topple like dominoes. Meanwhile, protests in Greece against the government's planned austerity plan turned violent as protesters clashed with police and thousands of strikers marched. Three people died when rioters set a central Athens bank ablaze, underscoring the difficulty faced by cash-strapped governments trying to force spending cuts.

German Chancellor Angela Merkel gave a stark warning of what was at stake. "There is no alternative to the aid to be agreed for Greece if we want to secure the financial stability of the euro area," she told lawmakers in Berlin.

The cost to insure the debt of Germany and France hit their highest levels in more than a year on Wednesday, as weakness spread through credit markets on concern about widening fiscal challenges for peripheral European nations.

Large-cap consumer staples were among the winners on the Dow, including Wal-Mart, up 1.4 percent at $54.77, and Coca-Cola, up 0.9 percent to close at $53.66.

The Institute for Supply Management said the pace of growth in the U.S. services sector, which accounts for some two-thirds of U.S. economic activity, was unchanged in April compared with March, while a separate report showed the U.S. private labor sector added 32,000 jobs in April.

Private Sector Hiring Up For First Time Since 2008

The labor market grew on Wednesday as the latest data indicated that the job market among private companies expanded for the first time since 2008, while plans for layoffs fell to their lowest level in four years. The private sector added 32,000 jobs in April, according to the report by payrolls processor ADP Employer Services. The data comes two days before Labor Department’s payrolls report, which is expected to show a second straight month of job gains. The February and March private sector ADP figures were revised to show gains instead of losses. The last time the private sector registered job gains was in January 2008, according to ADP.

The ADP report, jointly developed with Macroeconomic Advisers LLC, showed the March figure was revised to show a gain of 19,000 from an originally reported fall of 23,000, and a rise of 3,000 for February.

"Employment has turned the corner in total and is moving up and has been for several months now, but gains so far remain muted," said Macroeconomic Advisers LLC chairman Joel Prakken.

Meanwhile, the pace of growth within the services sector was unchanged in April compared with March and expanded below the rate expected by the Street. According to the Institute for Supply Management, its employment component fell slightly to 49.5 from 49.8 the prior month.

Recent data has pointed to strength in the economic recovery but unemployment remains high, at 9.7 percent, and is expected to stay at that level in April. Temporary jobs to conduct counts for the census, held every 10 years, will likely account for the bulk of the April gain, with private sector hiring expected to pull back from March's spectacular 123,000 increase.

Employers announced 38,326 planned job cuts last month, the lowest number of layoffs since July 2006 and down from 67,611 planned job cuts in March, outplacement consultants Challenger, Gray & Christmas said in a report.