There is no lack of historical events in 2008, at least to people on Wall Street. Following the biggest single-day price increase in the history of the Nymex, crude re-wrote the history today by jumping another $10.75 and settled at $138.54, a new historical high. However, stock investors were not that lucky. After yesterday witnessing the best day in more than a month, the market today had its worst day in more than 3 months with all three major indices closed lower by around 3%. The obvious scapegoats of today’s sharp sell-off in the equity market were crude oil and unemployment rate, which jumped to 5.5% from 5.0% and the consensus was calling for an increase of 0.1%. But the 0.5% rise in the unemployment rate was mainly due to an influx of students into the job pool that caused the biggest jump in teenage joblessness in 60 years. The closely-monitored nonfarm payrolls actually came at -49K, better than -60K expected. In other job-related data, average workweek was 33.7 hours vs. 33.7 expected; hourly earnings rose 0.3% vs. 0.2% expected. In a separate report, wholesale inventories for April increased at a higher than expected pace of 1.3%, which might give the second quarter QDP a boost.
All major sectors were ending the session lower by at least 1%. Commodities were faring relatively well as a result of record high oil price and a new high in the CRB commodity index, which jumped another 3.6% following yesterday’s 2% gain. On the losing side, we had some usual suspects such as financials and consumer cyclicals, which typically perform poorly in a rising crude environment. Transportations, which was acting successfully against gravity most time this year, joined those usual suspects today. In fact, the Dow Transportation Average had its biggest single-day point drop just one day after closing at a new historical high. Indeed, the world is changing faster than we can imagine. In other markets, the US dollar was lower against most major currencies and treasuries rallied after the typical flight-to-quality. The VIX index jumped more than 25% but at 23.56, it was still too low to trigger a meaningful capitulation rally. The market breath was negative and the volume was on the heavy side.

The market had its best day in more than a month as all three major indices gained more than 1.5%. More important, it happened in a day with crude oil having the biggest one-day jump in terms of dollar value and two biggest bond insurers seeing their ratings cut by the S&P. The news on the economic front was mostly positive. Initial jobless claims came at 357K compared to 372K expected and continuing claims decreased to 3.093 million from 3.109 million in the previous week. We also had some good news from retailers. The Thomson Reuters Same Store Sales Index recorded a 2.5% gain in May while analysts called for a rise of 1.2%. Almost 60% of the retailers beat estimates.  
All major sectors were higher in today’s trading. Commodities and transportations were among the biggest winners. Interestingly, the Dow Transportation Average closed at a record high despite a record rise in oil price. The CRB commodity index jumped more than 2% led by agricultures and energies. The US dollar was mixed against major currencies. But it was lower almost 1% against the euro following comments by ECB President Trichet that it might increase the region’s interest rate as soon as next month. Treasuries continued to slide while yields moved higher across the board. The VIX index tumbled by more than 10% and now is below 19. The market breath was positive compared to previous few sessions. However, we suspect that much of today’s gain was due to anticipation of positive nonfarm payroll report coming out tomorrow morning. We had two similar situations back in May and February when the market had huge gains right before the job report but only saw the gains fade in the days following. Hopefully things are a little different this time.

The market finally broke its losing streak and ended the session mixed. The Nasdaq continued its leading role recently and advanced almost 1% while both the Dow and the S&P500 closed lower fractionally. The news on the economic front was mostly better than expected. The productivity figure for Q1 was revised slightly higher to 2.6% from 2.5%. At the same time, labour costs climbed at a revised 2.2% pace, matching the previous estimation and down from a 4.7% increase in Q4 2007. The ADP Employment report, which is from a survey to private firms, showed an increase of 40K in the private nonfarm employment while economists expected a drop of 30K. In a related note, Challenger, Gray & Christmas mentioned in a statement today that firing announcements rose to 103,522, the highest since December 2005. While the ADP and the Challenger reports were pointing to different directions, traders seemed to simply ignore both and focused instead on the government nonfarm report on Friday. Finally, the ISM service report also came at 51.7 compared to 51.0 expected. Taking a closer look, we can see that Business Activity/Production increased to 53.6 from 50.9 in the previous month; New Orders increased to 53.6 from 50.1; New Export Orders increased to 54.0 from 48.5; Employment decreased to 48.7 from 50.8 and Imports decreased to 48.0 from 50.0.  
Commodities continued to face selling pressure. Financials, despite an early sell-off in Lehman Brothers and a potential downgrade in two bond insurers, finished the session modestly lower. Technologies, transportations and consumer cyclicals were among the noticeable winners. The CRB commodity index continued to retreat and ended lower by around 3 points. Treasuries reversed from early gains following Bernanke’s remarks about inflation while the US dollar was higher against most major currencies. The VIX moved higher by another 3% after reaching the highest level in more than one month earlier. The market internals continued to improve while the volume was also on the heavy side.    

The market continued to lose ground amid renewed concern over financial industry. All three major indices closed the session lower although they were well off their intraday trough. The news on the economic front was actually better than expected. The factory orders for April unexpected jumped 1.1% following an upward revised 1.5% gain in the previous month. In addition, books also increased at a healthy rate of 2.6%. The better-than-expected factory orders report again shows a weak US dollar is making US-made goods more attractive to foreign buyers. Interestingly, the Fed Chairman Bernanke also made some comments regarding the US dollar and it is quite a rare event for the Fed Chairman to do so because that is usually the responsibility for the Secretary of the Treasury. Following Bernanke’s comments, the US dollar immediately reversed its early weakness and moved higher against the euro and the yen. However, a strong US dollar along with more than $3 plunge in the crude price was not enough to offset the negative sentiment caused by worries in the financial industry. 
Although some issues such as Lehman Brothers and Wachovia tumbled badly during today’s session, the overall financial sector fared relatively well and was off fractionally at the close. Energies were among the biggest losers as a result of lower oil price. The CRB commodity index ended the session lower by about 1.5%. Treasuries, on the other hand, continued to rally due to flight-to-quality trading. The VIX moved higher for the second day in a row and now is above 20. The market breath was somewhat better than yesterday but volume was also on the heavy side.

The market didn’t give investors a pleasant new-month surprise like it did in each of the previous two months. Instead, all three major indices ended the first session of June lower by more than 1%. The news on the economic front actually came slightly better than expected. The May ISM index, which is a national manufacturing survey, increased 2.1% to 49.6 while economists expected a flat reading. Digging a little deeper, we can see that exports increased to 59.5 from 57.5; imports increased to 49.5(although a reading below 50 still indicates a contraction) from 48.0 and prices increased to 87.0 from 84.5. Clearly, exports have become the major engine behind the overall economy. In fact, it has good chance to accomplish the magic of preventing the economy from running into recession despite continuous turmoil in the housing market. In a separate report, we had April construction spending decrease by 0.4%, which was slightly better than consensus of -0.6%. However, worsening situation in the UK mortgage lending market and a rating downgrade of several major brokerage firms by the S&P killed any hope of a meaningful rebound.
Commodities were among the few winning sectors in today’s trading. Financials, technologies and transportations were among noticeable losers. The CRB commodity index regained some ground after a 2% slump in the previous week. The US dollar was mixed against major currencies. Treasuries rallied across the board with the yield curve steepened. The VIX index, which is usually used as a fear indicator, jumped more than 10%. But at 19.83, it remained too low to trigger any capitulation rally. The market breath was quite negative as down volume outpaced up volume by a ratio of 3 to 1 on both NYSE and Nasdaq. However, the overall volume was quite tame.