Central Banks prepare stimulus feast…Investors not that hungry
Dow 12,897 (-0.36%) S&P 1,368 (-0.47%)
“Make it a triple” was the preferred bar-command for vacationing American investors hitting the beach yesterday following 3-straight positive days for the S&P 500 stock index. Foreigners watched in agony on Facebook as one topless Jeep wrangler after another invaded America’s beaches with flirtatious coeds and colors of the stars-n-stripes variety (#StagsOutFlagsOut). Despite major stimulus decisions from 3 of the world’s central banks and positive US employment developments, pesky Europeans halted the market’s positive streak – The Frankfurt-based European Central Bank’s (ECB) policy meeting only elevated concerns over the European economy. Financial stocks led the fall and Italian and Spanish borrowing costs spiked in reaction to the ECB message as the Dow slipped 47 points today.
Central Banks of China, Europe and England all move to stimulate economy
Market followers were bombarded with news in the morning that China and Europe are decreasing benchmark borrowing rates to encourage lending and the Bank of England was also planning to reduce borrowing rates by purchasing massive amounts of assets. These types of stimulus policy measures are usually applauded, pumping stocks up. But instead of being celebrated as likely to jump-start the economy, investors reacted negatively to the sign that every major central bank has now expressed fears that the global economies needs serious help; unfortunately there’s only so much central banks can do. The ECB in particular stressed that risks to European economic growth have “materialized” – never a nice post-vacation headline to return to.
Non-Manufacturing Index falls short of analyst expectations, but remains at a “growing” level
The ISM’s non-manufacturing index came in at 52.1 from last month’s 53.7, missing analyst expectations but still indicating modest growth. On Tuesday we reported to you the ISM “manufacturing index,” which covers productivity in heavy-duty areas like car plants and factories that make the equipment that run car plants. The ”non-manufacturing” index on the other hand covers 90% of the American economic pie (GDP) and includes data from communications, agricultural and transportation fields, so it’s no surprise today’s ISM non-manufacturing index numbers were looked at more closely.
Initial Jobless Claims report, ADP job report both signal improving job market
The morning’s report on weekly jobless claims drove gains early due to a lower than expected number, which indicates that fewer people got fired last week. These unemployment claims decreased by 14,000 to 347,000, still below the 400,000 claims threshold that economists consider a critical sign for a healthy economy. Meanwhile the payroll company ADP’s private version of tomorrow’s official June jobs report came in well above analyst consensus (the report is considered a preview of the government’s report). Economists anticipated another embarrassing gain of only 100,000, but ADP believes 176,000 jobs were added following last week’s upwardly revised 136,000 gain. Not too shabby.
Tomorrow:
- Today’s ADP data lifts expectations for tomorrow’s big government jobs report – Will the unemployment rate fall from the current 8.2%?
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