While you were sleeping: Stocks mixed ahead of jobs report

Thursday 3rd December 2009

Wall Street was mixed at midday as gains in technology stocks were offset by weakness in both energy and financials ahead of the release on Friday of the November jobs report.

Investors hoping for some positive labour news were disappointed today after private employers in the U.S. cut 169,000 jobs in November, or more than expected. The ADP report is often seen as foreshadowing the U.S. government report due on Friday.

Stocks have rallied in the U.S. for almost eight months on expectations that the world’s biggest economy is set for another period of expansion. The Standard & Poor’s 500 Index has risen 64% since March 9.

Today however, the ADP report’s negative sentiment was compounded by an unexpected rise in U.S. crude and gasoline inventories, which knocked oil prices, and shares in energy producers, lower.

Separately, U.S. Treasury Secretary Tim Geithner said he expected the Congress to pass new financial regulations this year. Financial shares fell amid increasing concern that the new rules will choke profits.

Earlier in the day, shares edged higher in Europe on hopes for more signs of an economic turnaround. National benchmarks in 16 of the 18 Western European markets. The Dow Jones Stoxx 600 Index added 0.4% to 246.52 in London, extending yesterday’s 2.7% increase.

The U.K.’s FTSE 100 was 0.3% higher at 5327.39, Germany’s DAX rose 0.9% to 5781.68 and the CAC 40 Index in France advanced 0.53% to 3795.92.

Investment strategists at UBS, Deutsche Bank and ING increased their forecasts for equity markets. The Stoxx 600 is expected to rise to 250 from 225 in 2010, according to Deutsche, while ING has set a 2010 target of 310.

The lack of any real forward momentum from Europe overnight is one reason why trading in the U.S. has been choppy for most of the session so far today.

The Dow Jones industrial average dropped 11.34 points, or 0.11%, to 10,460.24. The Standard & Poor's 500 Index edged up 0.15 points, or 0.01%, to 1,109.01. The Nasdaq Composite Index gained 12.49 points, or 0.57%, to 2,188.30.

Exxon Mobil and Chevron fell as the price of crude oil fell to less than $US77 a barrel.

Among financials, JPMorgan and Bank of America dropped. Analysts pointed to new rules on derivatives trading which could chop earnings at JPMorgan in particular.

Geithner told U.S. lawmakers today that a lack of transparency in over-the-counter derivatives left the U.S. financial system more vulnerable to fraud and manipulation.

"With careful supervision and regulation of the margin and risk management practices of clearinghouses, central clearing of a substantial proportion of OTC derivatives should help to reduce the risks arising from the web of bilateral interconnections among our major financial institutions," Geithner said.

Commodities, for the most advanced, except for oil.

A report from the U.S. Energy Information Administration showed crude stocks rose 2.1 million barrels last week, dwarfing a forecast for a 400,000 barrel build. Gasoline stocks rose more than expected.

NYMEX crude for January delivery fell $US1.61 to $US76.76 a barrel by 1610 GMT. Brent crude fell $US1.39 to $US77.96. While down today, oil has risen from $US33 a barrel a year ago.

While oil slid, gold continued its record run, continuing to be fuelled by a bleak outlook for the U.S. dollar. Gold reached $US1216.75 in European trading, and it also touched new highs in both euro and sterling terms.

Spot gold was bid at $US1214.75 an ounce at 1530 GMT. U.S. gold futures rose to a record $US1218.40.

Gold wasn’t the only precious metal to advance as platinum, silver and palladium also continued their rallies.

In early trading in New York, the yen weakened after a report suggested the government wouldn’t let the currency remain at its current level.

The yen slid 0.7% to 87.32 per U.S. dollar in morning trading in New York. The US dollar was little changed at $US1.5088 versus the euro.

Businesswire.co.nz

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