Dow: 12,971 (-0.29%) S&P 500: 1,375 (-0.30%)
The market today reminds us of those graphic maps from Lord of the Rings – Stock movements were so volatile that a chart of their activity looks more like an outline of the craggy mountains of Mordor. A major technical hiccup halted trading in the morning and the release of the Federal Reserve policy statement in the afternoon resulted in an up-and-down day of major swings. The key ADP jobs report for July ahead of Friday’s major employment news topped expectations, while 2nd quarter earnings came in more mixed. Stocks most tied to the economy (industrial and financial firms) led declines as the Dow managed to finish the day with just a 33 point loss.
Technical malfunctions at brokerage firm cause wild price swings
First and foremost, stocks were all over the place this morning due to major computer glitches at a huge brokerage firm called Knight Capital (KCG). Trading volume was extraordinarily high for very ordinary stocks like RadioShack (RSH), Dole Food (DOLE), and hundreds of others. The errors caused mass confusion on the exchange floor before Knight stopped taking orders for the day. Stock prices eventually settled to more normal levels as the markets corrected itself, but Knight’s stock has absolutely free-fell after this reputation-bruising fiasco (down 33% today).
ADP announces US economy adds 163,000 jobs
Everybody’s looking toward Friday’s official government employment report for July like it’s Christopher Nolan’s 4th Batman movie. Until then, consider the ADP jobs report to be the trailer. The payroll-tracking company announced that the economy added 163,000 private-sector jobs in July, beating expectations. ADP’s analysis is considered a precursor for the Labor Department’s upcoming report and is used by investors to help set expectations for how many non-farm jobs the US has gained.
Federal Reserve continues to hold off on more stimulus unless economy worsens
After three months of waiting patiently for stimulus from the Federal Reserve, investors are kicking and screaming after today’s disappointment. Wait a bit longer, oh impatient one. Ben Bernanke’s wise words reflect his fear that too much stimulus too soon will risk weakening the dollar. The quantitative easing that investors want entails printing money to buy assets (thus lowering interest rates), thus the major risk is inflation – a weakening of the dollar. The Fed announced they would wait and see how Friday’s job report is before pulling the trigger on further stimulus.
Nasdaq shares advance on share-buyback
The main corporate highlight today was Nasdaq Group (NDAQ), the company that operates the Nasdaq stock exchange on which mostly tech stocks are listed (the exchange is itself a publicly held company). Despite the bad publicity of Swiss bank UBS (UBS) yesterday blaming it for screwing up Facebook’s IPO, Nasdaq advanced 0.4% on its $300 million “share-buyback program,” in which it literally purchases its own stock to increase the value of the remaining ones. Speaking of Facebook (FB), the FB dropped 12% in 3 days (what the zuck).
- Big European Central Bank meeting – After Mario Darghi’s famed “whatever it takes to save the Euro” speech from last week, we better see some results…blue-balled investors can be quite irritable…
- Weekly Jobless Claims, June Factory Orders
- Earnings: General Motors, AIG, LinkedIn
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