Stocks faced stiff selling pressure, falling to new 2010 lows as the major indices declined every day this week on concerns about the global economic situation. The S&P 500 plunged 5.0% on the week.Meanwhile, the 10-year note yield fell below the 3.00% threshold for the first time in more than a year and the 2-year slipped below 0.60% to a record low amid a flight-to-safety.
Back in equities, all 10 sectors declined in broad-based selling as approximately 95% of stocks within the S&P 500 closed out the week in the red. Risky sectors declined the most, with financials falling 7.6%, materials shedding 6.8% and industrials slipping 6.5%.
Corporate news was relatively light as economic data acted as the main trading catalyst, continuing to paint a picture of a slowing recovery. In the U.S., private payrolls rose by a smaller-than-expected amount, initial jobless claims unexpectedly increased, consumer confidence plunged, and housing and manufacturing data disappointed.
The latest employment data clearly show that the U.S. is in the midst of a long labor recovery that will not turn into the V-shaped recovery that the market has been hoping for. Total nonfarm payrolls fell 125,000 in June, which was 25,000 worse than the Briefing.com consensus. The drop in payrolls was due to a 225,000 decline in temporary Census Bureau workers. Still, the number of private payrolls increased only 83,000, which was less than Briefing.com consensus of 100,000.
On the plus side, the unemployment rate declined from 9.7% to 9.5%, beating the consensus expectation that called for an increase to 9.8%. But this improvement was due to a 0.3 percentage-point dip in the participation rate to 64.7%. The so-called "real" unemployment rate -- which accounts for discouraged workers not looking for jobs and marginally attached workers who are not counted in the labor force but want a job and cannot find one -- stands at 16.5%, which is where it stood in June 2009.
The number of initial jobless claims for the week ended June 26 rose to 472,000, which was worse than the 458,000 claims expected. Continuing claims climbed to 4.62 million from 4.57 million.
The ISM Manufacturing Index for June came in at 56.2, which is worse than the 59.0 that had been forecasted, and is also the lowest level since January.
Pending home sales for May plummeted 30.0% month-over-month in the worst decline in the nine years of available records. Despite record low mortgage rates, housing demand has dropped precipitously following the cutoff of the homebuyer tax credits.
Consumer confidence in June plunged to 52.9 from 62.7, well below the consensus estimate of 62.0. There was nothing comforting about the reading, except for the fact that confidence takes a distant backseat to income when it comes to spending.
Outside the U.S., Chinese data helped fuel some of the selling pressure after the Conference Board revised its April Leading Economic Indicators for China sharply lower to a 0.3% gain from the previously reported 1.7% increase. PMI Manufacturing also came in at a weaker-than-expected 52.1 in June, down from 53.9 in May.
In corporate news, only five S&P 500 components reported their quarterly results this week, and none were market-moving names. Four companies reported better-than-expected EPS and one reported in-line earnings.
In currencies, the euro traded in volatile fashion this week, falling as low as 1.2152 before rebounding strongly to 1.2543. The U.S. dollar index shed 1.0% for the week.
Commodities took a hit as investors piled into safer assets. Crude oil prices plunged 8.4% and the CRB Index fell 4.2%.
The upcoming week is a shortened one for market participants, with U.S. markets closed Monday in recognition of the Independence Day holiday.
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