Weak U.S. Employment; World Markets Slump

123jump.com Staff
03 Jun, 2009
New York City

U.S. stocks edged lower after investors worried that stocks may have advanced too fast. The world markets in the last ten weeks have erased the losses of the year and are now in the positive territory for the year. Foreign investors increase their investments in Russia, China and India.

[R]10:30 AM New York – U.S. stocks edged lower after investors worried that stocks may have advanced too fast. The world markets in the last ten weeks have erased the losses of the year and are now in the positive territory for the year. Markets in Russia, China and India continue to attract attention of foreign investors. Fed Chairman Bernanke focused on rising fiscal debt in his testimony to lawmakers.[/R]

After a ten-week of rally that lifted markets around the world between 25% and 105%, investors are questioning how far stocks can go. Are we ahead of fundamentals?

Russian markets fell 4.5% today but in the last ten weeks have surged 105% and markets in China and India have surged 65% and 60%. Emerging markets and markets in Europe have also regained the losses of the year and are in the positive territory.

The Dow and S&P 500 index edged lower as markets around the world appear to be stretched. Cautious investors are focusing on valuations and quality of earnings.

In economic news, service industry index suggested that the sector is contracting at a slower pace. The service industry index of Institute of Supply Management increased to 44. Reading below 50 indicates a contraction and above 50 signals expansion.

ADP Employer Services reported that private sector cut 532,000 jobs in May after April losses were revised to 545,000 from the previous estimate of 491,000 cuts. The Labor Department is expected to release its monthly employment report and economists are looking for job losses of 525,000.

The ADP report indicated that small and medium size companies laid-off more workers than larger companies. Companies with less than 500 workers cut 431,000 workers of the total of 532,000 losses.

Service sector cut 265,000 jobs and manufacturing lost 149,000.

U.S. Gainers & Losers

Aetna ((AET)) dropped 8% to $25.08 after it lowered its earnings estimate.

Valero Energy Corp ((VLO)) declined 16% to $18.79 after it forecast second quarter loss of 50 cents a share. The company focuses on refining higher sulfur content crude oil to gasoline and diesel and but low demand of gasoline has wiped out margins. The company also plans to sell 40 million shares with an option to sell 6 million additional shares

Europe Markets Review

In London FTSE 100 Index traded lower 79.07 or 1.77% to 4,397.95, in Paris CAC 40 Index decreased 38.27 or 1.13% to 3,339.77 and in Frankfurt DAX index traded lower 31.63 or 0.61% to 5,112.43.In Zurich trading SMI decreased 28.22 or 0.52% to 5,404.00.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 37.36 or 0.38% to 9,741.67, Hang Seng index in Hong Kong increased 187.39 or 1.02% closed to 18,576.47, CSI 300 index in China higher 74.29 or 2.59% closed to 2,939.39. ASX 200 index in Australia increased 61.90 or 1.56% closed to 4,017.20. The KL Composite index in Malaysia lower 8.22 or 0.77% closed to 1,055.40.

The Kospi Index in South Korea increased 2.04 or 0.14% to close at 1,414.89. SET index in Thailand closed higher 7.95 or 1.38% to 582.25 and JSE Index in Indonesia increased 12.27 or 0.61% closed to 2,010.91. The Sensex index in India decreased 4.01 or 0.03% closed to 14,870.90.