U.S. equity markets choppy after ECB's bearish comments, employment data in focusReported by Proactive Investors on Thursday, 5 July 2012 (on July 5, 2012)
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Equity markets in the U.S. were choppy following an early drop on Thursday, as investors reacted to bleak comments from European Central Bank President Mario Draghi.
As at near market close, the Dow Jones Industrial Average fell 0.36% to 12,897, the S&P 500 was down 0.47% to 1,368 and the NASDAQ was flat at 2,976.
Draghi's comments trumped the news of interest rate cuts in Europe and China and positive employment reports in the United States.
"We see now weakening spots of growth in the whole euro area including countries that had not experienced that before," Draghi said at a news conference Thursday morning.
Earlier Thursday, the ECB's governing council voted to cut its key lending rate by a quarter of a percentage point to 0.75%, taking it below 1% for the first time in the central bank’s history.
In London, the Bank of England’s Monetary Policy Committee voted in London to boost the size of its asset purchases by 50 billion pounds - US$78.1 billion - bringing the total size of the program to 375 billion pounds. The U.K. central bank's rate-setting committee also left the main lending rate unchanged at a record low of 0.5%.
China’s central bank surprised markets by cutting its benchmark lending and deposit rates.
The Chinese central bank lowered its one-year yuan deposit rate 25 basis points and its one-year lending rate by 31 basis points.
The central bank also announced more relaxed rules on lending, allowing bank lending rates to fall to 70% of the benchmark rate, down from 80% currently.
In corporate news, U.K. bank Barclays (NYSE:BCS)(LON:BARC) saw its credit rating cut by two major credit rating agencies Thursday, in the wake of a trading scandal that has seen three senior officials, including CEO Bob Diamond, resign.
Both Moody's and Standard & Poor's maintained their ratings on the bank but lowered their outlooks to "negative" from "stable", which means that a downgrade of the actual rating is now more likely.
Apple (NASDAQ:AAPL) has suffered a court defeat in a case involving Taiwan’s HTC, with a London court ruling that HTC’s devices do not infringe Apple patents.
Meanwhile, June sales for retailers released Thursday were largely disappointing as consumer confidence ebbs, with few beating estimates for the month, and names like The Wet Seal (NASDAQ:WTSLA) dragging down numbers.
Target (NYSE:TGT), Costco (NASDAQ:COST), Macy's (NYSE:M) and the Gap (NYSE:GPS) also fell short. Those that topped analyst views in June were few and far between, including Stage Stores (NYSE:SSI), TJX Companies (NYSE:TJX) and Limited Brands (NYSE:LTD), the parent of Victoria's Secret and Bath & Body Works.
Chip maker Ramtron International Corp (NASDAQ:RMTR) said Thursday that its board has unanimously concluded that rival Cypress Semiconductor Corp's (NASDAQ:CY) offer to buy the company for $2.68 per share is "inadequate", and therefore rejected the latest bid.
AutoNation (NYSE:AN), a U.S.-based automotive retailer, said Thursday new vehicle sales spiked 38 per cent in June, boosted by strong import sales.
Walgreen Co. (NYSE:WAG) said Thursday it is acquiring a regional U.S. drugstore chain for $438 million that will give it a larger presence in the mid-Southern United States.
OraSure Technologies (NASDAQ:OSUR) was up over 11% after the Food and Drug Administration approved the company’s over-the-counter HIV testing kit.
On the economic front, the number of Americans who filed requests for jobless benefits declined by 14,000 last week to 374,000, the lowest level in six weeks.
Claims from two weeks ago were revised up to 388,000 from an originally reported 386,000, according to U.S. Labor Department data. Economists surveyed by MarketWatch had projected claims would total 386,000 in the week ended June 30.
Private-sector payrolls picked up in June, suggesting that the nation’s unemployment may have declined, according to a report from payroll processor Automatic Data Processing.
According to the data, private sector payrolls rose 176,000 in June, led by small businesses and the service-providing sector.
Economists had expected an increase of 100,000. The May level was revised to a gain of 136,000 from a prior estimate of 133,000.
The all-important monthly jobs report for June is due for release Friday with economists expecting the Labor Department to report that nonfarm-payroll employment rose 100,000 in June, compared with a weak 69,000 in May. They also expect that the unemployment rate remained at 8.2%.
In another signal of a slowing U.S. economy, the services sector grew at its slowest pace since January 2010, according to an index released Thursday.
The Institute for Supply Management said its services index dropped to a reading of 52.1% in June from 53.7% in May. Readings above 50% indicate expansion, and major components in the index were still holding above that level.
Commodities
On the NYMEX, crude futures for August delivery dropped 0.3% to $87.36 a barrel while gold futures for August delivery declined 0.8% to $1,609.40 an ounce.
Europe
European stocks closed mixed with the FTSE 100 up 0.1%, the DAX sliding 0.5% and the CAC 40 dropping 1.2%.
Links:  Full news story
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