U.S. Rally Fizzles and Stocks Gyrate on Improved Jobs View

Bikram Pandey
05 Aug, 2011
New York City

Stocks gyrated in the day with losses and gains as high as 2% after employment picture improved in July. The unemployment rate declined but stayed elevated raising doubts about the economic health. In earnings, AIG swung to profit and Procter & Gamble net rose 15%. European markets trimmed losses.

[R]4:00 PM New York – Stocks gyrated in the day with losses and gains as high as 2% after employment picture improved in July. The unemployment rate declined but stayed elevated raising doubts about the economic health. In earnings, AIG swung to profit and Procter & Gamble net rose 15%. European markets trimmed losses.[/R]

U.S. indexes meandered after employers added higher than expected 117,000 jobs in July and jobless rate fell to 9.1%. The benchmark indexes shot up 1.5% at the opening and then dropped 2% and retraced gains in the afternoon to settle fractionally high.

The better than expected employment data cheered the market and trimmed losses in Europe but the elevated unemployment rate may not be enough to pull the economy out of the recessionary trend.

In the earnings news, AIG swung to quarterly profit and Priceline.com surged 11%. Imperial Sugar third quarter net loss widened. Procter & Gamble fourth quarter net income increased 15% to $2.51 billion. Viacom third quarter net earnings rose to $574 million.

The European markets entered bear phase with the indexes in Italy, Spain and Switzerland hit 2-year lows and near 20% declines from the peaks. UK, France and Germany indexes are down 10% in the year on the growing inability of the euro-zone to tackle debt contagion. Allianz quarterly profit declined.

Industrial production in the euro area was mixed with German output falling unexpectedly in June. French deficit narrowed in June. Swiss inflation eased and Greek inflation slackened in July. Italy''s gross domestic product expanded at 0.3% and Spanish economy eased in the second quarter.

The UK indexes slumped 8.6% on Friday, dropped 10% and plunged 14% from the May peak. The UK home prices rose and output price inflation climbed in July. Hunting agreed to acquire TSI Acquisition for $775 million. Prudential first-half net surged but RBS swung to quarterly loss.

Stocks in Japan plunged after struggling for two weeks and closed down 3.7% on Friday, declined 5.4% in the week and dropped 9% in the year. The rising prospects of the U.S. sliding in recession and Europe’s inability to tackle debt stress also contributed to the market jitters. The indexes are still above March 15 lows.

The Australian benchmark index plunged 4% following a worldwide sell-off that wiped out between 3% and 5% in most markets. The Australian index is down 19% from its peak and markets in Italy, Spain and Switzerland are down more than 20% in three months.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 2.6% and 30-year U.S. bond closed down at 3.87%.

The U.S. dollar increased at $1.4275 to one euro and fell against the Japanese yen to 78.43 yen.

Immediate delivery futures of Texas crude oil increased $0.40 to $87.03 a barrel and futures of natural gas increased 0.004 cents to $3.94 per mbtu and gasoline price increased 7.53 cents to 281.25 cents a gallon.

In metals trading, copper decreased 10.95 cents to $4.12 per pound, gold added $1.50 to $1,660.50 per ounce and silver decreased $1.24 to $38.19.