Wall Street Wrap – Market Down Slightly and it is a Win

After yesterday’s large gain, stocks dropped slightly today with the S&P 500 losing 5.40 points (-0.48%, 1,120).  The Dow Jones Industrial Average finished lower by 38.00 points (-0.35%, 10,636) and the Nasdaq 100 lost 7.18 points (-0.37%, 1,891)

Today’s market action was a win as many of the economic reports released today were below expected.  There were three numbers released that involved the retail market with the weekly ICSC-Goldman Store Sales reporting at -0.1% compared to last weeks rise of 0.6%.  Domestic Motor vehicle sales were expected to come in at an annual rate of 8.8 million and the reported number was 8.9 million.  Redbook’s chain store, discounters and department store sales reported a year-over-year growth of 3.0% compared to a prior 2.7% growth.

Personal Income and Outlays, an indicator on how much people are making and spending, showed no month-over-month change for Income (0.0%) while the consensus estimate was looking for a 0.1% increase.  Year-over-year the number did register a decent 2.6% gain.  Personal Spending, a very important number for demand, also came in flat at 0.0% month-over-month with analysts looking for an increase of 0.1%.  Spending year over year was up 3.1% with the previous months year-over-year number up 4.6%.

What do these numbers mean all rounded up together?  On a year-over-year basis people ramped up their spending more slowly in June 2010 than they did in June 2009.  Even though personal income increased, spending increases are slowing down and this caused one of the hardest hit sectors today to be the retail sector.  The S&P Retail Index was weak dropping 1.91% on the day with J.C. Penney Co., Inc. getting hit the hardest dropping $2.10 or 8.24% to $23.38.

Factory Orders came in weak, dropping 1.2% with analysts expecting a drop of 0.5%.  Adding insult to injury the prior months drop of 1.4% was revised to a drop of 1.8% showing that things are not looking to good on the manufacturing front.

The Pending Home Sales index dropped from 77.6 to 75.7 with the National Association of Realtors warning that near-term existing home sales will be ‘notably-lower’ as a result of the expiration of the government home buyer tax credit .

Dow Chemical (DOW) got slammed after releasing earnings of 50 cents a share with analysts expecting 54 cents.  The stock was one of the biggest losers on the day dropping 9.98% (-$2.83) to $25.50. 

The Government Accountability Office (GAO) went undercover to see what was happening in the for-profit educational sector and did not like what they found.  The sector got hit as the GAO uncovered school executives encouraging applicants to falsify financial data in order to qualify for loans, among other violations both criminal and ethical.  Education Management (EDMC, -5.90%), Apollo Group (APOL, -4.94%), Corinthian Colleges (COCO, -5.51%) and ITT Educational Services (ESI, -4.52%) all got hit hard on the news.

Gold has been weak for over a month now but a recent climb has the Spdr Gold Shares ETF (GLD) pushing up against a resistance level.  New York Spot gold gained $4.40 a barrel (+0.37%, $1,187.40, 4:15 p.m.)  Crude oil added another $1.07 a barrel to $82.41 (+1.32%, 4:06 p.m.) and copper dropped for the first time in 5 days with the iPath Dow Jones-UBS Copper ETF (JJC) dropping 1.16%.  The JJC is up 4.7% in the last five trading days.  Copper and oil are watched closely as indications of what the market thinks of future economic activity as these are two very widely used inputs when producing or building most anything.

The biggest risk coming this week are a handful of job reports with the headline Employment Situation number on Friday.  This economy is fragile and the bottom line is the number of people out of work. Tomorrow we get the Challenger Job-Cut Report at 7:30 a.m. and the ADP Employment report at 8:15 a.m. On Thursday The Monster Employment Index comes out at 6 a.m. with Jobless Claims out at 8:30 a.m. Friday morning is the big number - the Employment Situation is out at 8:30 a.m. with the headline number - 9.5% unemployed expected to increase to 9.6%.

NOTE: After the close Priceline (PCLN) beat earnings and is up 41 points in the after-market.  I recommended this stock at $183 and it is now trading $271 (+48%).

Tuesday, August 3, 2010 - 4:30 p.m.