A mixed batch of economic news left the major market indices mixed as well to end the week. Of course, the focus Thursday was the June employment report, but data on jobless claims, the ISM Non-Mfg. Survey and the ECB announcement on interest rates all played a part in trading Thursday.

The employment report was expected to show a decline of about 50,000 nonfarm payrolls in June. However, with the ADP Employment data so week on Wednesday, some felt the news would be disappointing. Though lower than expected, the decline of 62,000 payrolls wasn’t as bad as many had feared. Nonetheless, revisions for April and May left payrolls down by 52,000 more than initially reported. Average hourly earnings rose 0.3 percent, as expected, putting hourly earnings up 3.4 percent in the past year compared with a gain of 4.2 percent in consumer prices.

The household survey remained unchanged with the unemployment rate at 5.5 percent. This matched expectations, but traders are still concerned about the sharp jump in the unemployment rate from April to May. In fact, jobless claims were a disappointment this morning for the week ending June 28. Claims soared to 404K during the week, well above estimates for a reading of 385K. This pushed the four-week moving average to 390,500, its highest reading since October 2005.

Fearing the worst, stocks remained mostly positive Thursday in a shortened trading session. However, the fact the European Central Bank [ECB] raised interest rates by 25-basis points didn’t help. The ECB President, Jean Claude Trichet, had all but preannounced the rate hike as he harped on inflation pressures. However, Mr. Trichet did ease concerns by being less hawkish about future rate hikes.

On Wednesday, the ISM Mfg. Survey showed a surprise move above 50, but this strength did not carry over to the services sector. The ISM Non-Mfg. Survey fell to 48.2 in June when a reading of 51.0 was expected. The biggest concern in the report was the prices paid index, which rose 7.5 points to 84.5. New orders fell 5 points to 48.6 and economists are concerned that high input prices are leading to declines in orders. The employment component was also very weak, falling nearly 5 points to 43.8.

Oil prices remained a focus Thursday with the commodity hitting yet another record high. Crude rose to a high near $146 before closing the session at $145.29, a gain of $1.72 a barrel. There are a lot of wildcards affecting crude prices including weakness in the dollar, trading speculators, Middle East tensions and simple supply and demand.

Next week’s economic calendar is much lighter, but with some key reports on tap. Data on chain store sales, jobless claims, international trade and import/export prices all could have an impact on stock prices. Of course, comments by Fed leaders, including Chairman Bernanke will also be closely watched.


Jody Osborne

Senior Staff Writer & Options Strategist

Optionetics.com ~ Your Options Education Site