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Weak US Labor Data Sunk The American indices
US indices started the Thursday session with a solid decline after more signs of weakness in the U.S. labor market and concerns about sluggish global economic growth, raising worries about the companies’ profit outlook. Before the opening bell the government data showed higher than expected rise of the Initial jobless claims for the previous week with their number reaching 444 000. In addition, the ADP private sector employment for August dropped by 33 000, while estimated to fall just by 20 000. The data appears to be disturbing ahead of the long waited key report of the Nonfarm payrolls, which is scheduled to be released on Friday. Despite that, there was also good news during the day. The Labor costs surprisingly ticked lower by 0.5% in the second quarter, while the Labor productivity for the same period rose by 4.3%, which is more than the 3.0% estimated. Separately, the ISM Service index came in at 50.6 for August, which suggests growth since it is above 50.
Economists were expecting a reading of 49.5.
The biggest blue-chip decliner were the shares of Caterpillar Inc. off by 5.6% to $63.94 falling in tandem with fellow farm and machinery equipment maker Terex Corp which issued a profit warning, citing slower business. Terex’s stocks sunk by entire 19.7% to $38.02.
Shares of Wal-Mart Inc were among the only two advancing Dow components during the whole day but finally remained unchanged at $59.78. The world’s largest retailer’s monthly sales topped projections, and management also offered an upbeat forecast for the current month.
Financials stocks weakened, led by shares of Lehman Bros. Holdings (-10.4%, $15.17) and Merrill Lynch (-7.5%, $26.21), which were hurt by reports they may be having some trouble clearing up their balance sheets.
In an average trading volume session all the three indices closed in red.
Dow Jones Industrial Average fell by 3.0% to 11188.23, S&P500 declined by 3.3% to 1236.83 and Nasdaq Composite was down by 3.2% to 2259.04.
Trading volume on NYSE was 1.3 billion shares, with a ratio decliners/advancers 5 to 1, and volume on Nasdaq was 2.3 billion shares, with a ratio decliners/advancers 4 to 1.
TECHNICAL OVERVIEW
S&P 500 – USA
The consolidation of S&P500 is finally over as the index suffered a serious drop breaking the key support level at 1250. For the moment the downward movement is limited by the next support at 1230, there is still a big chance for resumption. We will probably witness an extension of the downward movement as the main targets would be key bottom at 1200, followed by 1180. On the upside resistance is seen at 1245, followed by 1270 and 1290, which are respectively 38.2% and 50.0% retracements of the 1391-1150 drop.
S&P 500 – USA (chart, table)
DAX 30 – Germany
DAX suffered a serious drop after the key support level at 6470, which is 38.2% retracement of the 7229-5997 drop, was broken successfully. For the moment the downward movement is limited by the next serious support at 6260, which is 23.6% retracement of the mentioned drop, but there is still a big chance for resumption. We will probably witness an extension of the downward movement as the main targets would be the levels 6210 and 6165. If the test of 6260 fails, the trading will remain in range and on the upside resistance of the upward movement will be seen at 6400, which also coincides with the 26-days SMA, followed by ex-support level 6470 and 6520.
DAX 30 – Germany (chart, table)
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05.09.2008 Dow daily report.pdf, 533 Kb
