Stocks come off highs, but still manage to start the third quarter with gains. The Dow ($INDU) gained 57.06 points, or 0.68 percent, to a level of 8,504.06. The S&P 500 ($SPX) added 4.01 points, or 0.44 percent, to a level of 923.23. The Nasdaq ($COMPQ) tacked on 10.68 points, or 0.58 percent, closing at 1,845.72. Volume was very light on the session with the NYSE trading just 950.8 million shares and the Naz turning over just 2.00 billion shares. Market breadth was positive by a 22-to-8 and 18-to-9 margin on the Big Board and Naz respectively.

Economic news was a focus Wednesday with reports on several areas of the economy released. With the employment report due out tomorrow, traders were focused in on the ADP Employment report; a precursor to the nonfarm payrolls data. This report was disappointing, showing a decline of 473,000 in June. Expectations for nonfarm payrolls are much lighter at a decline of about 375,000. The Challenger report showed that nearly 75,000 job cuts were announced during the month, down from 111K in May.

In other news, mortgage applications fell 4.5 percent this past week despite the fact mortgage rates fell 10 basis points. The refinancing index fell 30 percent for the week. In related news, the pending home sales index rose 0.1 percent, putting the year on year gain at 3.2 percent. The fact is that recent housing data has pointed to a deceleration in slowing, but isn't showing any improvement either.

The manufacturing sector got mixed news Wednesday with the ISM Mfg. Index coming in close to expectations, but construction spending declining. The ISM Index rose to 44.8 in June from 42.8 in May, but remains in contraction territory below 50. Construction spending in May fell 0.9 percent when estimates were for a decline of just 0.5 percent. April's report ended a long streak of declines, but May returned to negative territory.

Shares of Microsoft (MSFT) rose 1.14 percent to $24.04 on news the company's new Bing search engine gained market share, although it still trails Google (GOOG). GOOG shares fell just 0.71 percent on the news to a price of $418.59.

Ford (F) shares lost 2.64 percent, even though the automaker reported much better sales data of the month than other companies. Ford sales in the U.S. fell 10.9 percent in June, pushing it past Toyota (TM) as the No. 2 automaker. Toyota and Honda both saw monthly sales declines of more than 30 percent.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site