Fundamentals

U.S. Equities Recover Losses In Last Hour Of Trade

U.S. Session Key Developments

•    US Economy Loses 20K Jobs In January
•    Consumer Credit Falls Lower Than Expected
•    Speculation That EU May Bailout Member Countries Increases

After trading lower for most of the day, U.S. Equity indexes closed in the green following a report on US Consumer Credit and speculation that the European Union may bail out Greece and Spain.  The Dow Jones Industrial Average was down as much as 1.8 percent at its lowest point of the day.  The blue chip index broke through 10,000 and proceeded to trade down to 9,835 before closing right above 10,000 for the second day in a row.  The all-important Non-Farm Payrolls report drove stocks lower in the early going.  The report showed that the U.S. had lost another 20,000 jobs even as expectations were for a rise of 15,000.  Nonetheless, the U.S. Unemployment Rate actually fell from 10.0 percent to 9.7 percent in January.  The divergence in the data is because the payroll data and the unemployment rate come from two different surveys.  The morning’s economic slate also showed that Average Hourly Earnings rose more than anticipated.

Stocks weren’t the only securities on the move this morning as the dollar index traded to a six-month high of 80.683 and commodities were broadly lower.  That all changed in the final hour of trading after the Federal Reserve reported that consumer credit in the U.S. declined in December by $1.7 billion, less than the $10 billion decrease economists estimated.  Additionally, there may have been profit taking by investors on short positions ahead of the weekend.  Uncertainty about how the European Union will react to growing budget concerns in Greece and Spain add incentive to investors to close those positions for fear of being on the wrong side of a market moving announcement over the weekend.  Still, in a speech from the Group of Seven meeting in Canada, German Finance Minister Wolfgang Schauble said Greece has to “pay the price” for running up the largest budget deficit in the EU.  The single currency ended the day 0.3 percent weaker against the dollar while the dollar index, which measures the greenback against a basket of currencies, gained 0.3 percent.  After closing pit trading much lower, commodities advanced in electronic trading after 2 PM EST.  Crude was unable to recover completely, continuing its month-long decline to 71.19, down 2.67 percent from yesterday.  On the other hand, gold spot made a full recovery to close 0.24 percent higher at 1,066.

DJIA 30                      10,012.23                    +10.05                         +0.10%
The blue-chip index was slightly higher after a 167 point swing enabled the index to recover its earlier losses.  Three stocks advanced for every two that declined while Cisco Systems Inc., Intel Corp. and Alcoa Inc. each climbed over 2 percent for the biggest gains on the index.  Industrials dropped by 0.5 percent for the biggest drop on the index.  The sector was led by Boeing Co. and General Electric, which were both down over 1.5 percent.

S&P 500                      1,066.19                       +3.08                           +0.29%
The broad base Standard & Poor’s 500 Index was led higher by Basic Materials stocks as commodities rebounded in electronic trading after the close of commodities exchanges.  Resource companies, led by Newmont Mining and Freeport-McMoran, gained 3.62 percent in today’s session.  Moreover, Airgas Inc., the largest distributor of industrial gases, gained 40 percent for the biggest gain on the S&P 500.  The shares rose after Air Products & Chemicals Inc. offered a $60-a-share bid for the company.

NASDAQ                     2,141.12                        +15.69                          +0.74%
The tech-heavy Nasdaq Composite Index was the best performer of the three major US Indices as tech stocks were among the best performers throughout the day.  Large-cap tech issues provided strength for the index as Cisco maintained momentum from its better than expected earnings announcement on Wednesday.  Apple Inc. and Intel Corp. also gained 1.71 percent and 2.42 percent respectively.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com