Stocks ended an abbreviated session mixed on Thursday following the release of some mixed economic data. The trading session saw light volume as some investors looked to extend their holiday weekend, adding to some volatility in the markets.
The markets reacted positively after the Labor Department released its highly anticipated employment report for the month of June. While employment in the U.S. decreased for the sixth consecutive month, the decrease came in roughly in line with economists' expectations.
The report showed that non-farm payrolls fell by 62,000 jobs in June, matching the revised decrease of 62,000 jobs in May. Economists had expected a decrease of about 60,000 jobs compared to the decrease of 49,000 jobs originally reported for the previous month.
The Labor Department also said that the unemployment rate held steady at a nearly four-year high of 5.5 percent. Economists had been expecting the unemployment rate to edge down to 5.4 percent after surging up 0.5 percentage points in May.
Meanwhile, activity in the service sector unexpectedly contracted in the month of June, according to a report released by the Institute for Supply Management on Thursday, with the index of activity in the sector falling below the key 50 level.
The ISM said that its index of activity in the service sector fell to 48.2 in June from 51.7 in May, with a reading below 50 indicating a contraction in the sector. Economists had been expecting the index to edge down to a reading of 51.0.
The tech-heavy Nasdaq underperformed the other major averages, hurt by a 30.7 percent decline by Nvidia (NVDA). The company lowered its quarterly forecast due to weaker demand and strong competition. At the same time, the chipmaker announced a major charge due to a production glitch.
The major averages finished the session well off of their intraday highs, with the Nasdaq ending the day in the red. While the Nasdaq closed down 6.08 points or 0.3 percent at 2,245.38, the Dow closed up 73.03 points or 0.7 percent at 11,288.54 and the S&P 500 closed up 1.37 points or 0.1 percent at 1,262.90.
Despite the gains by the Dow and the S&P 500, the major averages all closed lower for the holiday-shortened week. The Nasdaq showed a notable decline, falling 3 percent for the week, while the Dow and S&P 500 posted weekly losses of 0.5 percent and 1.2 percent, respectively.
Sector News
Drug stocks turned in some of the best performances, with the Amex Pharmaceutical Index ending the session with a gain of 1.9 percent. The index added to gains posted in the previous four sessions to set a monthly closing high.
Within the pharmaceutical sector, Amgen (AMGN) and Sanofi Aventis (SNY) were two of the biggest gainers. Amgen closed up 4.1 percent, compared to a 4 percent gain by Sanofi Aventis.
Chemical stocks also saw significant buying interest, as reflected by the 1.1 percent gain posted by the S&P Chemical Index. The index had been trending lower for the past two weeks, setting a three-month closing low in the previous session.
Other stocks that saw notable gains include defense and computer hardware stocks. The Philadelphia Defense Index closed up 0.7 percent, while the Amex Computer Hardware Index ended the session 0.7 percent higher.
On the other hand, health insurance stocks showed considerable weakness, hurt by some negative analyst comments. The Morgan Stanley Healthcare Payor Index closed down 3.1 percent to set a three-month closing low.
Some resource stocks ended the day sharply lower as well, including natural gas, oil service and gold stocks. The Amex Natural Gas Index closed down 2.7 percent, the Philadelphia Oil Service Index ended the session 1.7 percent lower, while the Amex Gold Bugs Index saw a decline of 1.7 percent.
Disk drive stocks also posted substantial losses. The Amex Disk Drive Index fell 2.6 percent, extending a month long downtrend. With the decline, the index set a three-year closing low.
Dow Components
Most of the Dow components ended Thursday's session with moderate gains, sending the blue chip index well above the unchanged line. Of the 30 stocks that make up the Dow, only 8 closed lower.
JP Morgan Chase (JPM) saw one of the biggest gains within the Dow, closing the day up 2.1 percent. The stock added to a gain posted in the previous session, moving further away from the two-year closing low set on Tuesday.
United Technologies (UTX) also saw significant buying interest. Shares of the diversified manufacturer ended the session 2.3 percent higher. The stock had been trending lower for the past week, closing at a nearly two-year low on Wednesday.
Earlier, the Pentagon said that United Technologies' Sikorsky Aircraft unit recently won a $14.5 million contract from the Army to produce parts for the UH-60M helicopter.
As traders looked for bargains, General Motors (GM) also ended the day with a substantial gain. Shares of the automaker closed up 1.4 percent, ending a recent downtrend. The stock saw a steep decline for the past two months, setting a multi-decade closing low on Wednesday.
Other Dow components that saw notable gains include Alcoa (AA), Procter & Gamble (PG) and American Express (AXP). Alcoa closed up 2.1 percent, Procter & Gamble closed up 1.6 percent and American Express closed up 1.6 percent.
Meanwhile, taking a cue from the insurance sector, AIG (AIG) ended the session with a sharp decline. The stock slid 1.9 percent, reversing most of the gains posted in the previous two sessions.
Intel (INTC) also showed considerable weakness. The stock fell 1.3 percent, although it closed well off of its intraday low. Nonetheless, shares of Intel set a three-month closing low on the decline.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region closed mostly lower Thursday, as crude oil set fresh record highs, raising stagflation fears. Japan's Nikkei 225 average closed lower for the eleventh consecutive session, closing down 0.2 percent.
Meanwhile, the major European markets ended the day higher following the interest rate hike by the ECB. The French CAC 40 index closed up 1.1 percent, the German DAX index closed up 0.8 percent, while the U.K.'s FTSE 100 index ended the session up 0.9 percent.
Treasuries ended a choppy trading day with modest losses. The benchmark ten-year note traded on either side of the unchanged line throughout the day. Subsequently, the yield on the ten-year note closed up 1.4 basis points at 3.973 percent.
Looking Ahead
While there was a lot of key economic data squeezed into this holiday-shortened week, the economic calendar next week is relatively light. Nonetheless, traders are likely to keep an eye on reports on import and export prices, the trade deficit, and consumer sentiment.
On the earnings front, Alcoa (AA) will report its second quarter results on Tuesday, marking the unofficial start of the earnings season. General Electric (GE), Pepsi Bottling Group (PBG), and Marriott (MAR) are also due to release their quarterly results next week.
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