Stock Market News For August 05, 2016

Benchmarks ended mostly flat on Thursday as investors refrained from making big bets ahead of Friday’s U.S. nonfarm payroll report. Hiring data will help gauge the strength of the economy and give an insight into the path of further rate hikes. While, the S&P 500 and the Nasdaq relinquished modest gains, the Dow fell less than 5 points lower.

Bank of England’s (BOE) big stimulus package did drag down the pound to new lows, but its effect on U.S. stocks remained more or less muted. Meantime, investors also digested mixed reports on initial claims and factory orders, while earnings season in the U.S. continued to wind down, with the likes of Viacom, Teva Pharmaceuticals and Kellogg, among others, posting quarterly results.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.

The Dow Jones Industrial Average (DJI) declined a meager 0.02%, to close at 18,352.05. The S&P 500 eked out gains of 0.02% to close at 2,164.25. The tech-laden Nasdaq Composite Index closed at 5,166.25, increasing 0.1%. The fear-gauge CBOE Volatility Index (VIX) dropped 3.4% to settle at 12.42. A total of around 3.5 billion shares were traded on NYSE on Thursday. Advancers outpaced declining stocks on the NYSE. For 55% stocks that advanced, 41% declined.

Investors exercised caution ahead of the much awaited July’s jobs report scheduled to be released today. The Fed, especially, is giving much attention to the report since another 200,000 plus numbers of job additions will surely increase the chances of a rate hike as early as September. Hiring had climbed to 287,000 in June, while gains were a paltry 11,000 in May.

Better-than-expected rise in private sector jobs last month had already strengthened the case for the Fed to hike rates this year. U.S. private employers added 179,000 jobs in July, above analysts’ expectations of around 170,000 jobs, according to the Automatic Data Processing, Inc. (ADP).

In order to mitigate the adverse impact of the European Union’s referendum vote, the BOE unveiled a four-point plan. BOE has officially trimmed interest rates to a new record low of 0.25% from 0.5%, a move that will definitely bring relief to the borrowers. BOE also intends to extend the quantitative easing program by purchasing $80 billion government bonds in the next six months and $10 billion corporate bonds over the next 18 months.

The BOE’s unexpected aggressive stimulus measures did somewhat help stocks to gather some momentum in early trade. But attention quickly shifted to the all-important jobs report, which eventually pushed major indexes to close mostly flat.

Additionally, BOE governor Mark Carney announced that additional funds would be released for banks, a cushion that will protect their profitability from low interest rates. As a result, the British pound registered its biggest fall since the aftermath of the Brexit vote in June.

Coming to the domestic front, initial claims rose last week by 3,000 to 269,000, the highest level since the end of June. Despite this increase, application for unemployment benefits remained well below their recent peak of 277,000 in mid-June.

Separately, factory orders declined sharply for the second straight month in June. Orders dropped 1.5% in June after falling 1.2% in May. Orders were dragged down in June by declines in durable goods orders, with transportation equipment orders tanking 10.5%. Excluding the volatile transportation sector, orders were actually up 0.4%.

In earnings news, Viacom, Inc.’s (VIAB) third quarter fiscal 2016 earnings per share were $1.05, beating the Zacks Consensus Estimate of $1.02 but declining 29% year over year. Teva Pharmaceutical Industries (NYSE:TEVA) Ltd (TEVA) also reported second quarter earnings per share of $1.25 that beat the Zacks consensus estimate of $1.18. Kellogg Company (NYSE:K) (K) too posted second quarter earnings per share of $0.91 that came in ahead of the Zacks Consensus Estimate of $0.90. Shares of Teva Pharmaceutical and Kellogg gained 3.5% and 1.7%, respectively, while Viacom’s shares fell almost 1%.

Among the S&P 500 sectors, the Technology Select Sector SPDR (XLK) advanced the most, gaining 0.5%. Key stocks from the sector including Apple Inc (NASDAQ:AAPL). (AAPL), Microsoft Corporation (NASDAQ:MSFT) (MSFT) and Facebook (NASDAQ:FB), Inc. (FB) increased 0.6%, 0.7% and 1.5%, respectively.

AUTOMATIC DATA (ADP): Free Stock Analysis Report

VIACOM INC-B (VIAB): Free Stock Analysis Report

TEVA PHARM ADR (TEVA): Free Stock Analysis Report

KELLOGG CO (K): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

FACEBOOK INC-A (FB): Free Stock Analysis Report

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