Daily Market Commentary for August 3, 2011
U.S. markets fell sharply again today, potentially extending a slide that could prove to be the longest in more than three decades, for the Dow Jones Industrial Average. (read more at Millennium-Traders.Com) http://www.millennium-traders.com/news/newscommentary.aspx
Institute for Supply Management reported services index dipped to 52.7% last month from 53.3% in June, putting the gauge at its lowest level since the winter of 2010. Expectations were for the services index to rise to 53.5%. ISM’s survey of U.S. manufacturing firms in July, released earlier this week, posted an even bigger decline in a sign that weakness has spread across almost the entire economy. Surveys indicate business conditions are flattening out. The U.S. service sector employs about four of every five workers and accounts for three-fourths of all economic activity. Any deterioration in these parts of the economy means less growth for the U.S. overall. New-orders portion of ISM services index dropped 1.9 percentage points to 51.7%, the lowest rate since August 2009. Backlog of orders index retreated 4.5 percentage points to 44.0%, marking the fourth straight decline. Employment index, which reflects hiring plans, slid to 52.5% from 54.1%. On a positive note, the production index climbed 2.7 percentage points to 56.1%, the first increase in five months. The prices index fell 4.3 percentage points to 56.6%, which means companies are paying less for raw or partly finished materials. Thirteen of the 18 service sectors tracked by ISM reported growth - down from 15 in June with transportation and warehousing, mining and real estate leading the way. Five sectors contracted, including health care and scientific services.
According to the ADP employment report released this morning, private-sector payrolls increased by a tepid 114,000 during the month of July. Predictions were for the ADP figure to rise by 85,000 in July after a downwardly revised 145,000 gain in June. The ADP report covers only private-sector employment and not government jobs.
Late Tuesday, Moody's Investors Service confirmed the U.S.'s triple-A rating following the increase in its debt ceiling however; they assigned a negative outlook on the rating. "The initial increase of the debt limit by $900 billion and the commitment to raise it by a further $1.2 trillion to $1.5 trillion by year-end have virtually eliminated the risk of such a default, prompting the confirmation of the rating at AAA," Moody's said in a statement. Moody's also said the debt deal is the first step in long-term fiscal consolidation that is the key in maintaining the sovereign rating at AAA. Moody's additionally warned that the negative outlook indicates that there is a risk of a downgrade if the U.S. fiscal environment weakens further and its economic outlook deteriorates significantly.
MasterCard (MA) shares surged to a record-high early Wednesday after the processor of credit-card payments topped Wall Street's profit and sales targets for the second quarter. Into the noon hour, shares had a high on the day of $326.57.
Quanta Services (PWR) shares were higher by 10% mid-day after reporting higher Q2 profit and strong growth the rest of the year and next.
R.R. Donnelley & Sons (RRD) shares were lower by 11% mid-day after reporting an 86% drop in second-quarter earnings, making it the biggest percentage decliner in the S&P 500 Index.
Allergan (AGN) reported Q2 earnings rose 2.7% as surging sales of the wrinkle-fighting drug Botox, plus some help from currency rates, helped offset higher costs sending shares higher by mid-day by 3%.
CenturyLink (CTL) shares were down 6% into mid-day after reporting Q2 profit fell 27% on higher acquisition charges, though its high-speed Internet subscribers grew.
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