Stock Market News for May 6, 2011 - Market News

Benchmarks continued to linger in the red on Thursday, weighed down by disappointing jobs data, as investors chose to exit the gold, silver and oil markets. Commodities fell significantly and crude slipped below the $100 per barrel mark.

The Dow Jones Industrial Average inched 1.1% down to 12584.17. The Standard & Poor 500 (S&P 500) closed at 1335.10, shedding 0.9%. For the first time ever since October 2008, the S&P 500 has dropped for the first four days of a month. The Nasdaq Composite Index declined 0.5% and settled at 2814.72. The fear-gauge CBOE Volatility Index rose over 19, gaining more than 9%. On the New York Stock Exchange, Amex and Nasdaq, consolidated volumes were 9.26 billion shares. On the NYSE, for every eight stocks that fell, only 5 managed to climb up.

Ahead of the monthly labor market data that is scheduled for release on Friday, initial claims data from the government adversely affected the markets as it reported claims had risen to their highest level in eight months. According to the Labor Department, initial claims increased to 474,000 for the week ending April 30, 2011, against the expected decrease to 407,000, after increasing to 431,000, the revised level for the previous week. The 4-week moving average increased to 431,250, the highest level since November, from the previous week’s revised average of 409,000. Seasonally adjusted insured unemployment from the prior week, ending on 04/23, was 3,733,000, an increase of 74,000 from the preceding week’s revised level of 3,659,000.

It was the massive sell-off in commodities that played a large role in the markets’ downtrend. Silver suffered its largest weekly decline in almost 30 years, falling to $37.47 an ounce. Gold also declined, dropping to $1,509 an ounce.

Crude prices finally settled below $100 per barrel after shedding 8.6% or $9.44. U.S. light crude, which settled at $99.80, declined to this extent for the first time since mid March. Crude prices had earlier sky-rocketed to multi-year highs on a few occasions over the past couple of months, taking their cue from violence in the oil-rich Persian Gulf nations. This time, crude prices took a downturn as concerns over the US economy gained strength and investors opted for the safety of the dollar. The biggest one-day drop of crude prices took its toll on energy shares. In the S&P index, the energy sector was the worst performer and shares of companies like Exxon Mobil Corporation (NYSE:XOM), Chevron Corp. (NYSE:CVX), ConocoPhillips (NYSE:COP), Marathon Oil Corporation (NYSE:MRO), Occidental Petroleum Corporation (NYSE:OXY) and Anadarko Petroleum Corporation (NYSE:APC) dropped 2.6%, 2.0%, 2.3%, 3.9%, 2.7% and 2.3%.

Over the past couple of months, higher crude prices had automatically hurt the economy, because of the resultant inflationary pressures. Higher gasoline prices and a surge in transportation costs added to increased consumer spending. Consumers felt the burn and so did the manufacturers. Higher raw material costs bolstered expenses leaving investors and companies concerned about declining profit margins. Inflationary pressures might cool down with the drop in crude prices, but prices have to be lower for a sustained period of time to have a significant impact on the overall price level. Federal Reserve Chairman Ben Bernanke had earlier suggested that the job market poses a bigger concern for the economy than inflationary pressures. He said inflationary turmoil was only a short-term phenomenon. Now that crude prices have declined considerably, Bernanke’s statement, as we had said in an earlier report, does sound realistic. The job market does pose a threat and recent data on employment has caused much heartburn among investors.

Meanwhile, the same-store sales report from the retail sector showed some momentum as the Easter holidays boosted sales, enabling retail companies to beat the sales estimates. However, retailers said they faced the spectre of surging costs, rising fuel prices and limited job growth. Shares of retailers like Target Corp. (NYSE:TGT), Ross Stores Inc. (NASDAQ:ROST), Macy’s, Inc. (NYSE:M), Limited Brands, Inc. (NYSE:LTD) and BJ’s Wholesale Club Inc. (NYSE:BJ) climbed 2.3%, 6.9%, 3.7%, 0.3% and 0.1%, respectively. However, shares of Costco Wholesale Corporation (NASDAQ:COST) and J. C. Penney Company, Inc. (NYSE:JCP) slid 0.7% and 5.0%, respectively.

Stock Market News for May 6, 2011 – Market News

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