Stocks stumbled out of the gate on Wednesday after the ADP National Employment Report fell 10,000 short of expectations.
The major stock indices had a rough first hour on Wednesday, after the ADP National Employment Report indicated that 175,000 new private sector payroll jobs were added in January, missing economists’ expectations for an increase of 185,000 jobs. Stocks picked up a bit after the January 2014 ISM Non-Manufacturing Report on Business rose to 54.0 percent, slightly beating economists’ expectations, which ranged from 53.7 to 53.9 percent. The report’s employment index rose to 56.4 percent from January’s 55.6 percent. Although this report from the Institute for Supply Management is often referred to as the “ISM services PMI” the Institute actually uses the term “Non-Manufacturing Index” or NMI.
The good news from the ISM was not enough to send the major stock indices significantly out of the red, as the S&P 500 spent the afternoon bobbing up and down at the breakeven level, before finally fading during the last 40 minutes of the session.
The Dow Jones Industrial Average (DIA) lost 5 points to finish Wednesday’s trading session at 15,440 for a 0.03 percent dip. The S&P 500 (SPY) declined 0.20 percent to close at 1,751.
The Nasdaq 100 (QQQ) fell 0.44 percent to finish at 3,454. The Nasdaq 100 remains below its 50-day moving average, which is currently 3,522. The Russell 2000 (IWM) dropped 0.84 percent to end the day at 1,093.
In other major markets, oil (USO) declined 0.09 percent to close at $34.71.
On London’s ICE Futures Europe Exchange, March futures for Brent crude oil advanced 42 cents (0.40 percent) to $105.59/bbl. (BNO).
April gold futures advanced $6.20 (0.50 percent) to $1,257.40 per ounce (GLD).
The transportation sector experienced a sudden loss of cabin pressure on Wednesday, as the Dow Jones Transportation Average dropped 0.83 percent to 7,075, falling further below its 50-day moving average of 7,272 (IYT).
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity, while earnings beats by Panasonic and Toyota helped fuel investor enthusiasm. Japanese stocks climbed as the yen weakened to 101.42 per dollar during Wednesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average jumped 1.23 percent to 14,180 (EWJ).
In mainland China, the stock markets were closed for the Lunar New Year. Last Thursday, stocks declined after Markit Economics released the final reading on the HSBC China Manufacturing PMI for January, which indicated a drop to a six-month low of 49.5, a worse result than the flash reading of 49.6. A reading above 50 indicates expansion and a reading below 50 indicates contraction. The Shanghai Composite Index dropped 0.82 percent on Thursday to 2,033 (FXI).
On Wednesday, disappointing casino revenues in Macau helped send Hong Kong’s Hang Seng Index 0.60 percent lower to 21,269 (EWH).
In Europe, stocks finished the day unchanged, as investors digested a batch of mixed earnings reports. The Euro STOXX 50 Index ended Wednesday’s session at Tuesday’s closing level of 2,962 – remaining below its 50-day moving average of 3,050. Its Relative Strength Index is 33.58 (FEZ).
Technical indicators revealed that the S&P 500 slipped further below its 50-day moving average of 1,810 after declining 0.20 percent to finish Wednesday’s trading session at 1,751. Its Relative Strength Index (RSI) declined from 36.09 to 35.37. The MACD continues to sink past negative 16, suggesting that the S&P could continue its decline during the immediate future. Weak Bounce – A Lot More Is Needed
On Wednesday, three sectors advanced and six sectors declined. The energy sector took the hardest hit, falling 0.98 percent.
Consumer Discretionary (XLY): +0.13%
Technology: (XLK): -0.09%
Industrials (XLI): -0.04%
Materials: (XLB): +0.12%
Energy (XLE): -0.98%
Financials: (XLF): -0.10%
Utilities (XLU): -0.44%
Health Care: (XLV): -0.56%
Consumer Staples (XLP): +0.07%
Bottom line: The Institute for Supply Management’s slightly better-than-expected Non-Manufacturing Index for January was not enough to counterbalance anxiety about Friday’s upcoming non-farm payrolls report, after the ADP National Employment Report for January fell short of expectations.
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