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Stock Market News for August 10, 2012

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Benchmarks ended their see-saw ride on Thursday with only paltry gains. Despite, the meager gains, the S&P 500 extended its stay in the green into a fifth consecutive day. However, the Dow closed in the red as investors were caught in a dilemma, whether to focus on positives at home or the negative economic reading from China.

The Dow Jones Industrial Average (DJI) dropped 0.08% to end 10.45 points lower at 13,165.19. The Standard & Poor 500 (S&P 500) edged up a mere 0.04% to finish yesterday’s trading session at 1,402.80. The tech-laden Nasdaq Composite Index gained 0.3% and was up to 3,018.64. The fear-gauge CBOE Volatility Index shed 0.3% and settled at 15.28. Consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were roughly 5.41 billion shares, once again lower than 2011’s daily average of 7.84 billion shares. Advancing stocks moved past the decliners on the NYSE; as for 53% stocks that gained, 43% closed in negative territory.

Markets struggled to find definite direction through the day’s trading session. While the benchmarks added modest points in the morning, they slipped into the red soon after noon, only to rebound once again. Investors have gained strength from what has become the S&P 500’s longest winning stretch since March this year. Apart from trading over its psychological level of 1, 400, the S&P 500 has gained over 10% since June 1, when it registered a five-month low. A major factor behind this uptrend is the earnings results by S&P 500 companies. A Bloomberg data noted that 72% of the S&P 500 companies have managed to outperform the Street estimates in the second quarter.

Investors were faced with both positive as well negative developments yesterday. The dilemma was evident in the benchmarks’ movement. For one, investors were greeted by further encouraging labor data.  The U.S. Department of Labor reported that the advance figure for seasonally adjusted initial claims dropped 6,000 from prior week’s revised figure of 367,000 to 361,000 in the week ending August 4. This also compared favorably with consensus estimates of 370, 000. As a quick reminder, this is the second set of positive labor data after a strong government nonfarm payroll report had helped benchmarks snap their four-day losing streak last Friday.

Thus, investors’ confidence about labor conditions was buoyed for the second time. Meanwhile, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, reported that trade deficit narrowed in June. According to the data: “Total June exports of $185.0 billion and imports of $227.9 billion resulted in a goods and services deficit of $42.9 billion, down from $48.0 billion in May, revised. June exports were $1.7 billion more than May exports of $183.3 billion. June imports were $3.5 billion less than May imports of $231.4 billion”. Consensus estimates had expected a trade deficit of 47.5. The trade deficit was at its lowest in 18 months.

Amidst these positives, investors’ sentiment was somewhat jolted after China’s factory output growth was down to the weakest level in over three years. The second-largest economy’s yearly industrial output growth weakened to 9.2% in July, according to National Bureau of Statistics. This was lower than June’s level of 9.5%. Also, ‘the finished goods inventory sub-index of the manufacturing purchasing managers index’ was down to 48 in July as against June’s reading of 53.2, thus suggesting a contraction. Further, there was evidence of slowing demand for raw materials as the producer price index suffered a yearly decline of 2.9% in July.

Thus, investors struggled to gain a perspective, leaving benchmarks unsure of a definite direction. As for the individual stocks, E TRADE Financial Corporation (NASDAQ:ETFC) jumped sharply by 6.9% following an announcement that CEO Steven Freiberg has been sacked. On the earnings front, Kohl's Corporation (NYSE:KSS) reported soft sales numbers but managed to edge past estimates. However, the company’s shares lost 1.2%. Monster Beverage Corp (NSDAQ: MNST) slumped 9.7% after missing estimates. Meanwhile, NVIDIA Corporation (NASDAQ:NVDA) and Nordstrom, Inc. (NYSE:JWN) were slated to report their results after the closing bell.

Separately, English soccer club Manchester United was en route to finalize its initial public offering and Financial Times quoted a close source saying that “Institutional investors have shown strong interest”. Each share of the 19-time English Premier League champion boasting star players like Wayne Rooney and Nani will reportedly be priced in the range of $16 to $20. Manchester United will trade under the ticker name MANU and the club giant will be offering 16.7 million class A shares.

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