Morning Watch, July 3
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July 3, 2008
Volatility could be the story with the session shortened and the release of the employment data. The employment report has been the focus this morning and traders were relieved the data wasn’t worse. The European Central Bank [ECB] hiked rates, which wasn’t unexpected given recent comments by ECB President Jean-Claude Trichet.
Thursday is a half day for stocks with the market closed Friday as well. Light volumes could create come volatility, but in the early going, stocks are higher despite some negative news. Of course, the focus today is the jobs report, which showed that nonfarm payrolls fell by 62,000 in June. This was a bit worse than expected, but traders were relieved the data wasn’t worse given the results of the ADP report on Wednesday.
Jobless claims soared higher this past week above 400,000, pushing the four-week moving average to 390,500. This data shows that the jobs market is still soft and that future payrolls data could remain weak.
In other economic news, the ECB raised interest rates by a quarter point due to rising costs for energy and food. However, Mr. Trichet did sooth concerns when he stated that he doesn’t have a bias on interest rate policy. Treasury Secretary Henry Paulson stated that a downturn in the economy is still the greater worry right now with core prices tame.
Shares of Nvidia (NVDA) are falling hard this morning with the stock down more than 25 percent. The graphic chips designer warned that second quarter earnings would fall well short of expectations. NVDA also stated that gross margins would shrink, despite affirmations that this would not occur when the company reported first quarter results. Today’s decline puts NVDA at a new 52-week low with the stock trading near $13.50 a share.
General Motors (GM) shares are seeing some gains this morning, up about 1.5 percent. The stock fell below $10 on Wednesday for the first time in 50 years after Merrill Lynch downgraded the stock and cut its price target to $7.
Despite the move into bear market territory Wednesday for both the Dow ($INDU) and Nasdaq ($COMPQ), the fear indices haven’t spiked like one would expect. In fact, the Nasdaq Volatility Index ($VXN) moved to 31 on Wednesday, but this is well below the high hit in January near 40 and in March near 37. The S&P 500 ($SPX) closed Wednesday just 10 points from a bear market, which is a 20 percent decline from a high, so it will be interesting to see if this index also officially hits this territory Thursday.
Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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