Discouraging U.S. nonfarm payroll data dragged the benchmarks to
sharp losses on Friday. This was the third straight time that the
US labor market showed such dismal signs. The report comes during a
week which has already witnessed a few weak economic readings.
Eventually, except for the Nasdaq, the benchmarks ended the week on
a losing note. Crude oil prices also moved lower and the energy
sector suffered a great deal.
The Dow Jones Industrial Average (DJI) suffered a triple-digit
loss as it slumped 124.20 points or 1% to close at 12,772.47. The
Standard & Poor 500 (S&P 500) dropped 0.9% to finish
Friday's trading session at 1,354.68. The tech-laden Nasdaq
Composite Index plunged 1.3% and was down 38.79 points to 2,937.33.
The fear-gauge CBOE Volatility Index (VIX) slipped 2.3% and settled
at 17.10. Volumes have been significantly low on most occasions
through the week and Friday was no exception. Consolidated volumes
on the New York Stock Exchange, the American Stock Exchange and
Nasdaq, were roughly 4.96 billion shares, sharply lower than last
year's daily average of 7.84 billion. Declining stocks on the NYSE
outnumbered the advancers, as for 65% stocks that declined, only
31% stocks could move up.
All eyes on Friday were fixed on the nonfarm payroll employment
data that was to be released by the U.S. Department of Labor.
However, when the report came in, it once again reflected the sorry
state of the labor market even after three years of the official
end of the recession. According to the U.S. Bureau of Labor
Statistics, nonfarm payroll employment increased by only 80,000 in
June. This was far lower than consensus estimates of an addition of
90, 000 jobs. The latest figures added to the gloom since the U.S.
labor market is suffering over the last three months. This was the
third straight month that the economy added less than 100, 000
Delving deeper into the report, the unemployment rate remained
constant at 8.2% and the number of unemployed persons also was
hardly unchanged at 12.7 million. Another major aspect that dented
the mood was that the growth in employment had significantly slowed
down in the second quarter as against the first three months. The
report noted: "In the second quarter, employment growth
averaged 75,000 per month, compared with an average monthly gain of
226,000 for the first quarter of the year. Slower job growth in the
second quarter occurred in most major industries".
Tepid growth in U.S. hiring, lower-than-expected jobs additions,
a static unemployment rate, and the slowing trend in the second
quarter versus the first quarter took a heavy toll on market
sentiment. However, the negative trend did not spur hopes of
further economic stimulus this time. Through the week, there have
been some dismal economic readings and the general mood has grown
optimistic about further quantitative easing by the Federal
Reserve. At the beginning of this week, a contraction in U.S.
manufacturing activity threatened to dent investor sentiment, but
hopes of economic stimulus from the central bank kept positive
sentiment afloat. Later in the week, economic activity in the
non-manufacturing sector was reported to be slower-than-expected,
reaching its lowest level since January 2012. This had sparked off
hopes of economic stimulus.
However, dismal nonfarm payroll data failed to sustain any such
hopes and it came after initial claims data that showed signs of
decline while the ADP reported addition of more-than-expected jobs.
Separately, the week also witnessed weak data from the
manufacturing sectors of Europe and China. Investors remained
apprehensive about the global financial environment and interest
rate cuts in China and the Euro zone and monetary policy measures
by The Bank of England were of no help to US markets. Thus, the
benchmarks, but for the Nasdaq, struggled to end on a winning note
on a holiday-shortened trading week. The Dow and S&P 500 lost
0.8% and 0.6%, respectively, while the Nasdaq edged up 0.1%.
Coming back to Friday's developments, crude oil prices lost 3%
and were down to $84.45 per barrel. The Energy Select Sector SPDR
(XLE) dropped 1.2% and energy shares including Exxon Mobil
), ConocoPhillips (NYSE:
), BP plc (NYSE:
), Transocean Ltd. (NYSE:
), Schlumberger Limited (NYSE:
), Marathon Oil Corporation (NYSE:
), Murphy Oil Corporation (NYSE:
) and Occidental Petroleum Corporation (NYSE:
) lost 0.9%, 1.0%, 1.8%, 2.2%, 1.4%, 2.0%, 1.0% and 1.4%,
BP PLC (BP): Free Stock Analysis Report
CONOCOPHILLIPS (COP): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
MURPHY OIL (MUR): Free Stock Analysis Report
OCCIDENTAL PET (OXY): Free Stock Analysis
TRANSOCEAN LTD (RIG): Free Stock Analysis
SCHLUMBERGER LT (SLB): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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