Caution On Wall Street Ahead of Jobs Report, Oil May Fall Further

Barry Adams
04 Aug, 2022
New York City

Benchmark stock indexes wavered in choppy trading ahead of the jobs report and crude oil continued to slide and dropped to a six-month low. 

The S&P 500 index was nearly unchanged at 4,151.94 and the Nasdaq Composite index increased 0.4% to 12,720.58. 

Futures of crude oil declined $2.31 to $88.35 a barrel and natural gas fell 9 cents to $8.16 a thermal unit. 

Crude oil futures extended losses this week to 10% and fell to the lows last seen February 3. 

On a weekly basis, West Texas Intermediate crude oil in New York and Brent crude in London, U.K.  are down the most since April on the global recession worries and falling energy demand from China and rising inventories in the U.S.

Falling demand and rising supply have changed the direction of gasoline prices at retail gas stations. 

Demand dropped to 8.54 million barrels a day from 9.25 million barrels a day in the previous week, according to the U.S. Energy Information Administration. Gasoline supplies also increased by 200,000 barrels to 225.3 millions of barrels

The current demand for gasoline is in-line with the demand levels seen in July 2020, when Covid-19 restrictions kept most drivers away from roads.

If the current demand remains low and gas supplies continue to rise, crude oil prices on exchanges and gasoline prices at retail stations are likely to fall further.  

Gasoline prices at pumps across the nation dropped for the 50th day in a row, AAA reported today. 

Average gasoline prices at retail gas stations fell to $4.14 a gallon, 67 cents lower than a month ago and 90 cents below the peak in June. 

Gasoline prices are still $1.05 higher than a year ago. 

Average regular gasoline prices on Thursday ranged between $3.65 and $5.54 a gallon.  

The yield on 10-year Treasury notes edged lower to 2.66% ahead of the monthly payroll survey data tomorrow. U.S. Treasury bond yields have been volatile for the last week and the yields on 10-year notes have fallen as low as 2.52% this week. 

Initial claims of unemployment at the end of last week rose 6,000 to 260,000, according to the latest report from the Labor Department. 

The Employment Situation Report, household survey measuring labor force status, for July is scheduled to be released Friday.

 The survey is expected to show an increase between 255,000 and 263,000 in payrolls after expanding by 372,000 in June. 

Earnings season continued and investors are awaiting another batch of earnings after the market closes.  

Internet retailers were in focus after the South America focused Mercado Libre posted results exceeding investors expectations. 

Alibaba Group said fiscal first quarter revenues increased to 205.6 billion renminbi and net income plunged 50% to 22.73 billion renminbi or 8.51 renminbi per American Depositary Share. 

Domestic China commerce business in the quarter declined in mid-single-digit from a year ago on the resurgent coronavirus and widespread lockdowns. 

However, the China commerce business began to improve in late May and June. 

China-focused retailers JD.com and Pinduoduo gained 4% after the release of Alibaba.com quarterly results. 

Ceridian HCM Holding Inc soared 9.8% to $64.89 after the payroll processing company posted second quarter earnings ahead of investor's expectations and issued a third quarter outlook ahead of expectations.   

Revenues increased 20.3% to $301.2 million and net loss shrank to $19.8 million from $25.8 million a year ago. 

The company guided third quarter total revenue between $304 million and $307 million, an increase of 18% to 19% on a GAAP basis and 20% to 21% on a constant currency basis. 

Shake Shack Inc plunged 7.5% to $50.42 after the fast food chain operator reported weaker-than-anticipated quarterly earnings. 

Shake Shack said second quarter revenues increased 23.1% to $230.8 million and same store sales rose 10.1% from a year ago. 

The fast food chain operator swung to a quarterly loss of $1.2 million from $1.9 million a year ago. 

 

Largest Rate Hike In UK In 27 Years, German Factory Orders Fell

European markets traded higher after Germany's factory orders fell less than expected and investors looked beyond the rising tensions between the U.S. and China. 

German factory orders fell 9% on an annual basis in June after dropping 3.2% in May, according to data released by Destatis.

On a monthly basis, orders fell 0.4% in June from May.  

The Bank of England lifted its key lending rate by 50 basis points to 1.75%, the largest increase in twenty seven years. 

The central bank forecasted inflation to peak at 13% and the central bank forecasted economic recession may start as early as this year and last as long as five quarters. 

The DAX index rose 0.6% to 13,661.26, the CAC-40 index increased 0.6% to 6,508.21, and the FTSE 100 index inched up a fraction to 7,446.52. 

Investors reacted to the latest batch of corporate results. 

Credit Agricole SA soared 5% after the French lender reported better than expected earnings but the Dutch lender ING Group fell 2.8% after its quarterly earnings disappointed investors. 

Glencore PLC gained 2.7% after the commodities trader reported first-half profit more than doubled to record high. 

 

Asian Markets Follow Higher Closing In New York 

Stocks in Asia generally closed higher and the indexes in China surged despite the ongoing military exercises near the island nation Taiwan. 

The benchmark index in Japan closed higher following the overnight surge in New York trading. 

Toyota Motors fell 3.0% to 2,091.50 yen  after the largest automaker reported a sharp fall in quarterly profit of 42%. 

Revenues rose 7% to 8.5 trillion yen and comprehensive income plunged 42% to 1.7 billion yen.  

Casio Computer surged 6.3% to 1,386.0 after the electronics company reported second quarter revenues rose 3% 61.3 billion yen and net income declined 6.5% to 5.7 billion yen. 

Subaru Corp jumped 8.3% to 2,386.0 yen after the automaker reported second quarter revenues surged 33% to 834 billion yen and net income soared 47% to 27 billion yen. 

Earnings per share jumped to 35.5 yen from 24.2 yen a year ago. 

The Nikkei 2005 index increased 0.7% to 27,932.20, the Hang Seng index rose 2.2% to 20.174.04. and the Sensex index closed down 0.1% to 58,298.80. 

Indexes in India closed down after rallying for six days in a row ahead of interest rate decision Friday. 

The Reserve Bank of India is expected to lift its key lending rate between 35 and 50 basis points.