US Holiday. Market is close today.

The market finished this shortened pre-holiday trading session in a mixed fashion. The Dow, after officially entering into the bear market territory yesterday, rebounded modestly with a gain of 0.7%. The Nasdaq, dragged by a profit warning from Nvidia, ended the session lower by 0.3%. For the week, the Dow was lower by about 0.5% and the Nasdaq lost 3%. We got some important economic news this morning and the results were quite mixed. Start with the most important economic report of every month – nonfarm payrolls. The number came at -62K, in-line with expectation. The previous month’s figure was revised to -62K as well. Worker’s average hourly wages rose 0.3% while the average work week remained at 33.7 hours. In addition, the unemployment rate held at 5.5% after soaring 0.5% in the previous month.  In a related note, the weekly claims came at 404K for the week ending June 28th compared to 385K expected. The continuing claims, on the other hand, decreased 19K to 3.116 million. Finally, the ISM Services index dropped to 48.2 from 51.7 in May. Economists were looking for a modest dip to 51.0. Almost all key components of the ISM Service survey were contracting in the month of June: Business Activity dropped to 49.9 from 53.6; New Orders dropped to 48.6 from 53.6; Employment dropped to 43.8 from 48.7 and Inventories dropped 53.0 from 54.0. Prices, on the other hand, advanced 7.5 points to 84.5.

Energies, despite a new record in crude price, were among the biggest losers for the session. Basic materials and transportations were stabilized following a sharp drop yesterday. On the winner’s side, healthcares were again among the best performers. The CRB commodity index dropped slightly as strengths in energies were offset by other areas. Treasuries were relatively quiet ahead of tomorrow’s holiday. The US dollar were higher against most major currencies as statements following the ECB rate hike were more dovish than some had expected. The VIX index dropped back under 25 while the market breath was modestly negative on both NYSE and Nasdaq.

The market sold off sharply on this Wednesday and sent both the Dow and the Nasdaq officially into the bear market territory, which is defined as a drop of more than 20% from the previous highs. Since 1962, the Dow experienced 11 bear markets, according to Birinyi Associates Inc. Declines averaged 29% and lasted 322 days. The biggest was a 45% drop during the 694-day period from January 1973 to December 1974. The S&P 500 was the only index among the big three that managed to stay above that magic line. But the cushion is as thin as a hair. The news on the economic front was mixed for the day. The ADP Employer Services reported a 79K drop in private sector jobs, which was larger than forecast and the largest since November 2002. It should be noted, however, historically the ADP report has little correlation with the more important nonfarm payroll report, which is scheduled to be published tomorrow morning. In a separate report, factory orders rose 0.6% in May following a revised 1.3% gain in the previous month. That was the third straight monthly gain and better than economists expected.

Basic materials and transportations were among the biggest losers for the session. As we pointed last week and again yesterday, there appeared some selling pressure from the previously hot commodity sector. Could it mean the commodity story is over? Odds are pretty good based on today’s action. However, it should be noted that even a sector is topping, it could still be very volatile for the next few weeks even months. Healthcares were again among the best performers in today’s session. The CRB commodity index, on the other hand, ignored actions in the stock market and closed at a fresh new high. Treasuries were sold off as typical flight to quality. The US dollar was lower against most major currencies ahead of ECB decision tomorrow, which is widely expected to raise its interest rate by 25bps. The VIX index finally shot up and closed at the highest level since March 17th. But we should expect to see a few more volatile sessions ahead. Finally, based on the latest survey results from Investor’s Intelligence, the Bull Ratio dropped under 42% this week due to a surge in bearishness. This is not only the lowest since the March low but also one of the lowest readings of the past decade.  

The market had a dramatic reversal on this first trading day of the new quarter. At its worst, all three major indices were lower by at least 1% and the S&P 500 was only inches away from its March lows. But a late day comeback triggered by better-than-expected sales results in GM made all three major indices end the session in green territory. The news on the economic front was actually quite positive. The ISM index increased to 50.2 in June from 49.6 while economists expected a drop to 48.6. Among its various components, the New Orders decreased slightly from 49.7 to 49.6 in June; Production increased to 51.5 from 51.2; Employment dropped to 43.7 from 45.5 and Prices increased to 91.5, the highest level since 1979 from 87.0 in the previous month. Clearly, the manufacturing side of the economy is still holding up relatively well despite headwinds from record crude price and declining home prices. In a separate report, construction spending in May fell 0.4% compared to a drop of 0.6% expected. It should be noted that private residential projects fell 1.6%, the 25th drop in the past 26 months.

Basic materials and transportations were among the biggest losers for the session. The former experienced some profit-taking last week and it looked like the pattern may continue for a while. On the winners’ list, we had names like healthcares and technologies. The CRB commodity index rose more than 1% and closed at a new high. Treasuries reversed from early gains and finished the session lower across the yield curve. The US dollar was mixed against most major currencies. The VIX index ended the session modestly lower after breaking 25 earlier. The new lows on NYSE and Nasdaq exceeded more than 1000 for the first time since mid-March.

The market finished the last day of the second quarter in a mixed fashion. The Dow, despite a modestly rebound in today’s trading, ended the month with a loss of 1288 points and for the quarter, it lost more than 7%. The Nasdaq posted a loss of nearly 1% for the session but for the quarter, it actually had a gain of less than 1%. The S&P 500 suffered one of its worst months in June and finished the quarter down by 2.5%. It was a light day in terms of the economic news. The Chicago PMI rose to 49.6 in June from 49.1 while economists were calling for a drop to 48.0. There was little impact from the report as investors are more interested in the national ISM data which is scheduled to be released tomorrow. Crude price finished session modestly flat after hitting a new record earlier.

Financials were among the biggest losers for the day and the quarter. On the winner’s list, it’s really anything that is related to crude oil. Crude oil itself is a big winner in the second quarter. After starting the quarter at around $100 per barrel, it broke $110 level on April 9th, $120 level on May 6th, $130 level on May 21st and $140 level on June 27th. The strong performance in crude oil also boosted the CRB commodity index, which gained more than 20% in the quarter despite a modest pullback today. The US dollar was higher against most major currencies today and believe it or not, it was also higher during the quarter. Treasuries had a modest rally today but for the quarter, it lost more than 2%, making it the worst quarter in more than four years. The VIX index gained 2% today. The new 52-week lows on NYSE and Nasdaq were exceeding 800 issues for the second session in a row.