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The U.S. market continued to decline on Wednesday, as ADP and the ISM reports failed to reach market expectations.
The major U.S. indexes continued to retrace the rally seen over the last two weeks of trading on Wednesday, as investors continued to cash out some portion of the their profits. In addition, the equity market sold off strongly after the ADP report, with the S&P futures falling as much as 1.5%. However, the futures market stabilized around the 990.00 area, and even retraced some parts of the decline seen just a few hours earlier.
Only the financial and the basic materials sectors managed to trade in the green during the U.S. session, while the other sectors posted relatively strong declines. By a huge margin, the gains in the S&P 500 index were led by AIG, which surged 61% as traders are pricing in better than expected quarterly results after rival companies beat analysts’ projections. The financials also led the pack of gainers in the Dow Jones index, and were the most active stocks in both the NYSE and in NASDAQ.
Poor macroeconomic data hit the market’s valuation on Wednesday. The ADP report showed that the U.S. economy continued to lose ground at a strong pace, a pace stronger than seen over the last few recessions. In addition, the ISM report showed that the service side of the economy continued to contract in July, which points out the ongoing deterioration of the economy, even though most market participants think that the economy has already bottomed.
Longer term Treasuries were sold, ahead of a massive auction of U.S. debt that culminates in September, at which time the U.S. Treasury will have offloaded the Stimulus package financing, to those that want U.S. debt, with the slack being back-stopped by the Federal Reserve.
Yield on the 10-year note gained 0.73 basis points to 3.764%.
The Dow Jones Index fell 21.18 points (0.30%) to 9,292.01, while the S&P 500 index lost 1.98 points (0.20%) to 1,003.67
Crude oil for August delivery was recently trading at $71.80 per barrel, higher by $0.40.
Gold for August delivery was recently trading lower by $1.90 to $967.80.
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