Daily Comments
USA: the markets cheered up ahead of Labor Day weekend
06.09.2010 8:15:00 Dmitriy Simonyan, Analyst, Global Markets (Finam)
On Friday, September 3, the US trading session kicked off on the back of fresh labor market data released by the US Department of Labor and featuring August figures. The nonfarm payrolls survey marked the most important event of the week.
Non-farm payrolls had been projected to decline for a third month in row, with the decline estimated at 105,000. However, actual figures proved to be more encouraging, with the drop equaling only 54,000. It is noteworthy that most layoffs were attributed to reductions of temporary census jobs. Private nonfarm payrolls showed a larger-than-expected increase in the number of job positions than anticipated (67,000). In addition, private payrolls were revised higher by 36,000. At the same time, though, the unemployment rate jerked up to 9.6% from 9.5% seen in July as approximately half million Americas resumed looking for job in August. The average workweek remained unchanged and totaled 34.2 hours, whereas the average hourly earnings rose 0.2%, i.e. similar to July figures while a 0.1% jump had been projected.
By and large, the newly released employment data could not serve as a strong emotional impetus, especially given the fact that many economists believe major improvements on the labor market can be expected only when employment growth is equal to about 150,000 per month. In the meantime, US investors haunted by recessionary fears welcome any better-than-expected data and view them as a reason for optimism.
This is why the markets reacted to the newly released figures with an upturn, which could not be substantially dampened by the Institute for Supply Management’s gauge of non-manufacturing activity which fell from 54.3 seen in July to 51.5 in August vs. the anticipated 53.5. As a result, the country’s three leading indices managed to snap a three-week losing streak and end the day and the week in bull market territory ahead of the long Labor Day weekend.
The Dow Jones Industrial Average Index gained 127.83 points, or 1.24%, and settled at 10,447.93, with a 2.9% weekly gain. The Standard & Poor's 500 Index rose 14.41 points, or 1.32%, to 1,104.51, with the weekly gain reaching 3.7%. The Nasdaq Composite Index jumped 33.74 points, or 1.53%, to 2,233.75, adding 3.7% to its market value during the day.
All top 30 representatives of the US economy managed to deliver positive performance, which had not been seen for quite awhile, with outsized gains posted by financial heavyweights JPMorgan Chase (+2.7%) and American Express (+2.3%), high-tech leader Cisco Systems (+2.5%), manufacturing giant Caterpillar (+2.3%) and the world’s largest media conglomerate Walt Disney (+2.2%).
Take-Two Interactive Software Inc., the supplier of interactive entertainment software, advanced 7.3% on higher-than-estimated quarterly profits and upwardly revised sales guidance.
H&R Block Inc., the biggest US leading tax preparer, moved 5.8% higher after narrowing its quarterly operating losses from continuing operations due to a newly developed strategy aimed at winning back customers.
One of the country’s largest commercial banks, Goldman Sachs, gained 5.4% on a decision to spin off its proprietary trading unit in order to meet the requirements set in new financial reform legislation. Philadelphia-based refinery Sunoco Inc. rose 3.9% on news former General Motors Co. Chief Executive Officer Frederick A. Henderson has joined the company as a senior vice president to help prepare for the previously announced separation of SunCoke Energy from Sunoco.
The world’s largest soup maker Campbell Soup Co. lost 3% of its market value on the back of an ongoing contraction in its US sales, despite significant marketing efforts.
COMEX gold futures for December delivery dropped USD 2.30, or 0.2%, to USD 1,251.10/oz.
With US labor market data overshooting expectations, gold temporarily lost its appeal as a safe haven. All in all, the precious metal rose 1% by the end of a 5-week winning streak.
Light, sweet crude oil futures for October delivery declined 42 cents, or 0.6%, trading at USD 74.60/bbl on NYMEX.
Thus, crude oil slipped despite growth-conducive factors, i.e. more favorable-than-anticipated US labor market data, growing global stock markets and a weaker greenback. Crude oil futures fell 0.8% compared to previous Friday’s close.
