Wall Street Cautious on Europe; Apple, Netflix Jump

Bikram Pandey
05 Jul, 2012
New York City

Stocks recovered from early losses after investors shifted focus to employment data. Central banks in Europe, UK and China took actions to revive economic growths. U.S. chain stores reported weak comparable sales in June. Crude oil, copper and gold declined more than 1%.

[R]5:00 PM New York – Stocks recovered from early losses after investors shifted focus to employment data. Central banks in Europe, UK and China took actions to revive economic growths. U.S. chain stores reported weak comparable sales in June. Apple and Netflix soared.[/R]

U.S. indexes struggled in the early trading but jumped in the positive zone in the afternoon.

Stocks meandered in the morning after central banks in Europe, UK and China offered more steps to revive economic growth but investors focused on cautious comments from the ECB president Mario Draghi.

In economic news, weekly jobless claims fell and private sector employment rose in June. The European Central Bank cut key rate to 0.75% and the Bank of England expanded asset purchase plan and China cut deposit and lending rate.

U.S. chains store retailers reported weaker than expected monthly sales increase in June. Retailers blamed weather, calendar and also weak consumer sentiment. However, Nordstrom, Costco, TJX and Limited Brands reported stronger than expected comparable sales. Costco June same store sales rose 3% and Limited Brands increased of 7%.

Apple Inc ((AAPL)) traded above $600 again when it crossed the level for the first time in early April after the company is preparing to launch smaller version of iPad that may be priced to match the rival tablet from Google.

Netflix ((NFLX)) soared more than 14% and traded above $80 for the first time since early May after the CEO Reed Hastings issued a short update on Facebook and boasted about customers streaming more than one billion hours of video in June.

The European indexes traded flat after Spain sold €3 billion of medium- and long-term debt. GKN agreed to acquire Volvo Aero for £633 million. Barry Callebaut slumped 3.1%.

In economic news in the region, EU productivity declined and the consumer price inflation in the Netherlands remained unchanged in June. German construction sector continued to shrink but Swedish service production rose in May.

The UK indexes traded sideways after the Bank of England expanded its asset purchase program but maintained record low interest rate. Home prices in the UK rose unexpectedly in June. Ireland raised €500 million from the sale of its 3-month treasury bills.

Robert E. Diamond Jr., the former chief executive of Barclays testified before the British Parliament's Treasury Select Committee in London on Wednesday and placed blame on the wider industry and also laid some of the blame on regulators and central bank.

Diamond said he was shocked, angry and “physically sick” after he learned that 14 traders rigged Libor rates putting the bank’s credibility at stake.

However, Diamond insisted that the bank is singled out because it was not the first to settle with the regulators. Last week, the bank agreed to pay £290 million to U.S. and UK regulators to settle allegations that the company's employees tried to manipulate the inter-bank lending rate.

Diamond added, “I can’t sit here and say no one in the industry didn’t know about the problems with Libor.

There was an issue out there and it should have been dealt with more broadly.”

In Asian markets, Tokyo stocks edged down after a month-long rally that powered indexes to 2-month highs. Machinery and construction stocks traded higher and Nikon closed at 4-year high on the expectations of better than expected profits in the camera division.

Australian stocks ended flat in a choppy trading as investors look ahead at central banks for additional monetary steps. Fairfax Media was in focus again after Gina Rinehart cuts her stake in the publishing company down to 15%.

Commodities, Bonds and Currencies

The yield on 10-year bond decreased to 1.60% and on 30-year bond fell to 2.72%.

The U.S. dollar inched higher to $1.2391 to a euro and increased against the Japanese yen to 79.89 yen.

Immediate delivery futures of Texas crude oil decreased 99 cents to $86.67 a barrel and Brent crude increased 23 cents to $100, futures of natural gas increased 0.05 cents to $2.95 per mbtu and gasoline price increased 2.4 cents to 274.71 cents a gallon.

In metals trading, copper fell 4.9 cents to $3.49 per pound, gold decreased $17.30 to $1,604.50 per ounce and silver decreased 63 cents to $27.65.