A weak finish to a strong start at Wall Street
A strong start to the day ended in a weak finish at Wall Street on Wednesday, 04 January, 2009. Couple of better than feared economic reports gave a good start to stocks early during the day. But the momentum faded after a few companies missed their earning estimates. Oil prices too gave up early gains after Energy Department reported more than expected build up in crude inventory during last week.
After trading higher by 65 points earlier during the day, The Dow Jones Industrial Average ended lower by 122 points at 7,956, the Nasdaq closed lower by 1.2 points at 1,515 and the S&P 500 closed lower by 6.3 points at 832.
Six of the ten sectors ended in the red today led by the telecom sector.
Today, disappointing earnings came from Disney and Kraft. Kraft also disappointed by lowering its outlook. Both companies weighed on the Dow.
Earlier during the day, The Institute for Supply Management reported hat U.S nonmanufacturing sectors continued to contract but at a slower pace in January. The ISM's non-manufacturing index rose to 42.9% last month from 40.1% in December. In November, the index reached a record low of 37.4%. Readings below 50% indicate that more firms are contracting than expanding.
The report detailed that in January, only two industries reported growth - health care & social assistance, and finance & insurance. Among the 16 industries reporting contractions were mining, retail trade, and arts, entertainment & recreation.
In a separate report, the ADP employment index reported today that U.S. private sector companies shed a seasonally-adjusted 522,000 jobs in January, 2009.
The ADP index, compiled from anonymous payroll data, showed that goods-producing industries lost 243,000 jobs, while service-producing industries lost 279,000 jobs. Large firms cut 92,000 jobs, medium-sized firms shed 255,000 jobs and small firms reduced their payrolls by 175,000 jobs. The ADP index covers only private-sector jobs.
December's job loss, according to ADP, was revised to a loss of 659,000 from 693,000. By contrast, the government data had showed private-sector job losses of 531,000 in December.
On the other hand, retailer Costco disappointed by announcing its second quarter earnings will be substantially below the current estimate, and that January same-store sales slipped 2% year-over-year. This led other retailers to be a laggard today.
On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $40.32/barrel (lower by $0.46 or 1.1%) on the New York Mercantile Exchange. Earlier during the day, it touched a high of $41.92. But while dropping, it touched a low of $39.74.
The EIA reported today that crude inventories rose for a sixth straight week to 346.1 million barrels last week, the highest level since July 2007. Meanwhile, U.S. refineries operated at 83.5% of their operable capacity last week, up from the previous week's 82.5%. The EIA also reported gasoline inventories rose by 300,000 barrels while distillate fuel, which includes diesel and heating oil, fell by 1.4 million barrels.
Among major developments in Washington today, President Obama stated that the government will impose an $500,000 compensation cap on companies receiving TARP funds.
Initial jobless claims for the last week are the first thing due tomorrow morning. Preliminary fourth quarter productivity data and fourth quarter unit labor costs are also due followed by the December factory orders.
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