Nov 05 2008
Stock Market Midday Update: November 5, 2008 Profit Taking - Economic Data Sink Stocks
The stock market is succumbing to profit-taking as investors digest the election results. Disappointing private employment and services sector reports are adding to the selling interest.
At midday, the S&P 500 is down 2.0%, which is near recently reached lows.
According to the ADP national employment report, nonfarm private employment declined by 157,000 in October. A drop of 100,000 was expected. September was revised to a decrease of 26,000 from a decrease of 8,000. The ADP data have had a spotty track record compared to the government’s report, which includes both public and private nonfarm payrolls, and is set for release on Friday.
The October ISM Services Index, a national nonmanufacturing survey, registered 44.4 in October, 2.6 worse than expected and 5.8 lower than the 50.2 reading in September. This marks the lowest level on record, which dates back to 1997. Because the result is below 50, it indicates contraction in the services sector — the sixth month of contraction in 2008.
In corporate news, Google (GOOG 353.88, -13.06) announced on its blog that it decided to end its advertising agreement with Yahoo! (YHOO 14.33, +0.98) after it became clear that government regulators and some advertisers continued to have concern about the pact. Google traded down on the news, while Yahoo saw a boost as traders speculated this may open the door to another Microsoft (MSFT 22.86, -0.67) offer.
Earnings have been mixed, and once again outlooks have leaned negative. Ambac (ABK 2.48, -0.92), Arcelor Mittal (MT 26.47, -5.23), Duke Energy (DUK 15.92, -1.00), Marsh McLennan (MMC 26.99, -2.71), MBIA (MBI 8.35, -2.11), Molson Coors (TAP 40.62, +2.04) and Transocean (RIG 81.10, -3.42) all missed estimates for their latest quarters. Devon Energy (DVN 80.35, -2.65), Medco Health Solutions (MHS 41.77, +3.76), Polo Ralph Lauren (RL 50.12, +0.61), Sara Lee (SLE 10.37, -1.49), and Time Warner (TWX 10.99, +0.16) beat in their latest quarters.
Oil prices have tumbled 7.1% to $65.50. The government’s weekly report showed a smaller-than-expected increase in crude stockpiles, which was offset by an unexpected increase in gasoline inventories.
All ten economic sectors are posting a loss. Telecom (-2.8%), financials (-2.7%) and energy (-2.2%) are the main laggards. The consumer staples (-1.0%) sector is outperforming on a relative basis.
