Markets ended the day lower on weaker economic news. For the day, the Dow Junes Industrial Average (DJIA) closed down 205.67 points to close at 11378.02, or 1.78 percent.
On the New York Stock Exchange (NYSE), there were 571 stocks advanced, 1,279 stocks declines and 23 stocks remained unchanged. There were also 33 new highs and 39 new lows.
Market Activity for July 31, 2008
As reported in yesterday’s Insights, the Gross Domestic Product (GDP) figures did not meet expectations for the second quarter and were reduced in the fourth quarter from expansion to contraction. The main contributors were personal consumption (added 1.08 percent), exports (added a huge 2.42 percent) and government consumption (added 0.67 percent). Housing continued to weigh on GDP with residential fixed investment subtracting 0.67 percent, but the big factor was the large subtraction from inventories that dragged down GDP by 1.92 percent.
Additionally, the Labor Department announced that the number of people seeking jobless benefits rose to the highest level in five years, although as Brent has established many times before, this weekly data is very volatile and is generally used as part of a four-week moving average instead of looking at each week independently.
In addition to the economic news, the market also responded to lower than expected earnings from ExxonMobil (ticker symbol: XOM). Although the company reported higher earnings in a single quarter in the history of corporations (a truly remarkable figure – nearly 11.7 billion of profit in a single quarter), it was less than Wall Street had expected (the thought almost 12.9 billion was on deck). The stock fell by 4.86 percent, leading the whole energy sector lower.
In addition to lower profits from XOM, crude oil fell by 2.19 percent or 2.77 per barrel to 124.09 per barrel in New York. This drop extended losses for oil to 11.4 percent for the month of July, making it the largest drop in percentage terms in the 25 year history of the New York Mercantile Exchange.
Wild-man Alan Greenspan hit the airwaves on CNBC just as the bell was about to ring. He told Maria Bartiromo that the U.S. is “nowhere near the bottom” of the housing slump. It’s funny because, two years ago I went to a conference in Washington D.C. where he was a speaker and at that time he told the audience that the worst was nearly over in housing. So much for the maestro –
Today we have what an old colleague of mine referred to as the “jobs jamboree.” The employment report is actually two separate reports that are taken from two separate surveys. The first report is the household survey looks at the employment data by reviewing 60,000 households.
The second part is the establishment survey looks at 375,000 businesses and looks at nonfarm payrolls, the average workweek and average hourly earnings. Generally the market focuses on the establishment survey given the relative size and data dependability.
The unemployment number came in a ticker higher than Wall Street estimates at 5.7%, but this is not terribly surprising after yesterday’s jobless claims number. Nonfarm payroll data came in slightly better than expected this morning and average hourly earnings matched the Street’s expectations, but average weekly hours fell slightly below expectations.
Additionally, we just got earnings from General Motors (ticker symbol: GM) and they are as disappointing as we expected – $15.5 billion second quarter loss. Don’t worry – we weren’t looking to buy – but we were looking at some GM bonds today for the fun of it. Right now issues maturing in 10 years or more are trading at 50 cents on the dollar, which would mean yields of 18 percent per year, assuming all of the payments are made along with getting your money back (obviously, a huge assumption!).
Last but not least, I saw this picture on Greg Mankiw’s blog. He is a professor at Harvard and keeps a timely blog. I thought the picture was great even though Pick n Pay’s are mostly in South Africa and New Zealand.
Have a great weekend!
Dave Ott, General Partner
On the New York Stock Exchange (NYSE), there were 571 stocks advanced, 1,279 stocks declines and 23 stocks remained unchanged. There were also 33 new highs and 39 new lows.
Market Activity for July 31, 2008
As reported in yesterday’s Insights, the Gross Domestic Product (GDP) figures did not meet expectations for the second quarter and were reduced in the fourth quarter from expansion to contraction. The main contributors were personal consumption (added 1.08 percent), exports (added a huge 2.42 percent) and government consumption (added 0.67 percent). Housing continued to weigh on GDP with residential fixed investment subtracting 0.67 percent, but the big factor was the large subtraction from inventories that dragged down GDP by 1.92 percent.Additionally, the Labor Department announced that the number of people seeking jobless benefits rose to the highest level in five years, although as Brent has established many times before, this weekly data is very volatile and is generally used as part of a four-week moving average instead of looking at each week independently.
In addition to the economic news, the market also responded to lower than expected earnings from ExxonMobil (ticker symbol: XOM). Although the company reported higher earnings in a single quarter in the history of corporations (a truly remarkable figure – nearly 11.7 billion of profit in a single quarter), it was less than Wall Street had expected (the thought almost 12.9 billion was on deck). The stock fell by 4.86 percent, leading the whole energy sector lower.
In addition to lower profits from XOM, crude oil fell by 2.19 percent or 2.77 per barrel to 124.09 per barrel in New York. This drop extended losses for oil to 11.4 percent for the month of July, making it the largest drop in percentage terms in the 25 year history of the New York Mercantile Exchange.
Wild-man Alan Greenspan hit the airwaves on CNBC just as the bell was about to ring. He told Maria Bartiromo that the U.S. is “nowhere near the bottom” of the housing slump. It’s funny because, two years ago I went to a conference in Washington D.C. where he was a speaker and at that time he told the audience that the worst was nearly over in housing. So much for the maestro –
Today we have what an old colleague of mine referred to as the “jobs jamboree.” The employment report is actually two separate reports that are taken from two separate surveys. The first report is the household survey looks at the employment data by reviewing 60,000 households.
The second part is the establishment survey looks at 375,000 businesses and looks at nonfarm payrolls, the average workweek and average hourly earnings. Generally the market focuses on the establishment survey given the relative size and data dependability.
The unemployment number came in a ticker higher than Wall Street estimates at 5.7%, but this is not terribly surprising after yesterday’s jobless claims number. Nonfarm payroll data came in slightly better than expected this morning and average hourly earnings matched the Street’s expectations, but average weekly hours fell slightly below expectations.
Additionally, we just got earnings from General Motors (ticker symbol: GM) and they are as disappointing as we expected – $15.5 billion second quarter loss. Don’t worry – we weren’t looking to buy – but we were looking at some GM bonds today for the fun of it. Right now issues maturing in 10 years or more are trading at 50 cents on the dollar, which would mean yields of 18 percent per year, assuming all of the payments are made along with getting your money back (obviously, a huge assumption!).
Last but not least, I saw this picture on Greg Mankiw’s blog. He is a professor at Harvard and keeps a timely blog. I thought the picture was great even though Pick n Pay’s are mostly in South Africa and New Zealand.
Have a great weekend!
Dave Ott, General Partner
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