Stocks drop as ECB cuts rate again
The stock market ended on a modestly lower note on Thursday, 04 September 2014 following a daylong retreat from the opening high. Overnight, the Bank of Japan and the Bank of England made no changes to their policy stances, while the European Central Bank announced a rate cut.
The Dow Jones Industrial Average closed down 8.8 points, or 0.1%, at 17,069. The Nasdaq Composite fell 10.3 points, or 0.2%, to 4,562.20. The S&P 500 lost 3 points, or 0.2% to 1,997.60.
The consumer discretionary sector jumped into the lead shortly after the open and remained in that position until the close.
The ECB lowered its key interest rate to very near zero, at .005%. The market place reckoned the ECB was on the verge of announcing fresh monetary stimulus. There was uncertainty on the precise timing of any such move. ECB president Mario Draghi's press conference saw the modest quantitative easing package unveiled. The Euro currency sunk to a 13-month low on the ECB news.
The policy move pressured the euro, sending the single currency to its lowest level since July of last year.
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There was a heavy slate of U.S. economic data due for release on Thursday at Wall Street, including the weekly jobless claims report, the ADP national employment report, the Challenger job cuts report, revised productivity and costs, the international trade report, the U.S. services PMI, the ICSC chain store sales report, the DOE liquid energy stocks report, and the ISM non-manufacturing report. That data was a mixed bag but mostly upbeat.
The initial claims level increased to 302,000 from an unrevised 298,000, while the consensus expected an increase to 300,000. Today's ADP National Employment Report revealed that employment in the nonfarm private business sector rose 204K in August, which was below the increase of 220K expected. The July reading was revised down to 212,000 from 218,000.
The U.S. trade deficit narrowed slightly in July to $40.50 billion, which was the smallest trade deficit since January, from a downwardly revised $40.80 billion (from $41.50 billion) in June, while the consensus expected an increase to $42.00 billion The goods deficit fell $200 million to $60.20 billion in July from $60.40 billion in June. The services surplus was unchanged at $19.60 billion
Nonfarm labor productivity in Q2 2014 was revised down to 2.3% in the second estimate from 2.5% in the advance estimate, while the consensus expected a revision up to 2.6%. A relatively large downward revision to hourly compensation (2.3% from 3.1%) led to a quarterly decline in unit labor costs (-0.1% from +0.6%), which represented the fourth decline out of the last six quarters.
The ISM Non-manufacturing Index for August increased to 59.6 from 58.7, while the consensus expected a drop to 57.8. That was the strongest reading of the Index since it was redone in January 2008.
Next up is the U.S. jobs report on Friday, which will give the latest reading on the important non-farm payrolls growth, seen at up 220,000 in August. Recent improving U.S. economic data suggests the Federal Reserve will continue to wind down its quantitative easing of monetary policy by the end of this year, and will likely begin to raise interest rates sometime in 2015.
On the geopolitical front there have been no major, markets-moving developments this week.
It was bright day for precious metals on Thursday, 04 September 2014 at Comex. Gold prices ended the U.S. day session moderately higher on Thursday. Gold prices rebounded just slightly from Tuesday's 11-week low, shaking off concerns of a strengthening dollar and an improving U.S. economy to show signs of life in an otherwise dreary stretch for the yellow metal.
Gold for December delivery settled up $5.30, or 0.4%, to $1,270.30 an ounce. September silver added nearly 4 cents, or 0.2%, to settle at $19.11 an ounce.
Crude prices ended lower at Nymex on Thursday, 04 September 2014 at Nymex. October crude oil traded in negative territory as the stronger dollar index weighed on prices.
Crude dipped as low as $94.16 per barrel and settled with a 1.0% loss at $94.51 per barrel.It touched a session high of $95.28 per barrel following inventory data that showed a draw of 0.905 million barrels when a draw of 1.0-1.1 million barrels was anticipated but quickly pulled back.
As per EIA U.S. crude-oil inventories declined 900,000 barrels in the week ended 29 August 2014. The report came a day later than usual due to Monday's Labor Day holiday. Market had expected crude stockpiles to decline 2 million barrels.
The EIA also reported gasoline inventories decreased 2.3 million barrels, and distillates inventories rose 600,000 barrels. Market had expected gasoline stocks down 1.6 million barrels and distillate stocks down 1.2 million barrels.
Participation was ahead of recent averages with more than 613 million shares changing hands at the NYSE.
Tomorrow, the Nonfarm Payrolls report for August (consensus 223,000) will be released at 8:30 ET.
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