Domestic markets were closed on Monday in observance of Memorial Day so trade this week started on Tuesday, when stocks advanced more than 1% amid speculation that plans for new spending in China were a sign of further stimulus from the country. Comments that political leaders in Greece want to remain with the euro also stirred a positive response.
Data on Tuesday came with little consequence. The Consumer Confidence Index for May fell to 64.9 from a downwardly revised 68.7 in the prior reading. The University of Michigan had posted the strongest Consumer Sentiment Survey in four years just one week before.
Sentiment among market participants soured by Wednesday, when the major equity averages fell in excess of 1% in response to renewed worries about the health and fate of the eurozone. Rumors regarding European bank recapitalizations were shrugged off.
News of a 5.5% drop in pending home sales during April failed to improve the mood since a 0.6% increase had been broadly expected.
The flow of data picked up on Thursday, but the underwhelming nature of the numbers forced the S&P 500 down to the 1300 line before buyers stepped in to provide support.
First quarter GDP was revised downward to reflect growth of 1.9%. Many economists had thought that the 2.2% increase featured in the preliminary reading would be revised to reflect growth of 2.0%.
Market participants were given a preview of the jobs picture via the latest ADP Employment Change. It showed that private payrolls increased during May by 133,000, which is less than the increase of 157,000 that had been expected, on average, among economists polled by Briefing.com.
The latest weekly initial jobless claims count increased to 383,000, which is more than the tally of 368,000 that many had come to expect following several straight weeks with initial claims staying near 370,000.
Trading volume on the NYSE surged to more than 1 billion shares on Thursday, which marked the final day of May. During the course of the month the S&P 500 sank more than 6% for its worst monthly performance since September.
Participants were compelled to sell on Friday by another round of disappointing data.
As if to compound concerns about the eurozone’s fiscal, financial, and economic conditions, a batch of banal PMI numbers were released by Europe after a lackluster PMI reading from China. They were followed by one of the worst US payrolls reports of the past year.
Official numbers indicate that nonfarm payrolls increased in May by 69,000, which is far less than the increase of 150,000 that had been expected, on average, among economists polled by Briefing.com. Nonfarm private payrolls increased by a mere 82,000, which is also hardly half of what had been broadly forecasted – the Briefing.com consensus had called for an increase of 168,000.
What’s more, the headline unemployment rate ticked up to 8.2%. Most economists expected it to remain at 8.1%.
Manufacturing data also proved uninspiring as the ISM Index declined during May to 53.5 from 54.8 in the prior month, missing the reading of 54.0 that had been expected for the latest reading.
Generally on par with what had been projected, personal spending and income increased in April by 0.3% and 0.2%, respectively, while core personal consumption expenditures increased by 0.1%. Construction spending increased during April by 0.3%, which is less than the 0.5% increase that many had come to expect.
While the data likely increased the probability of further Fed action, including another round of quantitative easing, it failed to prevent a steep sell-off. The efforts of sellers resulted in the worst one-day percentage drop for the S&P 500 since December, and left it to trade at a multi-month low beneath its 200-day moving average. The broad market measure hasn’t closed below that key technical line since the very end of 2011.
Gold garnered strong buying interest as traders turned defensive. The yellow metal’s price pushed up from an early morning loss to a session high of $1624 per ounce before it closed with a 3.6% gain at $1621.40 per ounce. Prior to today’s surge, gold was mired near the multi-month lows that had followed a few weeks of selling.
In contrast, oil prices extended their downtrend by dropping 3.9% to close pit trade at $83.17 per barrel. Along the way they logged their lowest level in more than seven months at $82.27 per barrel.
Oil’s slide played a part in Energy’s many poor performances this week. The sector fell more than 2% on Friday, and roughly 4.5% for the week.
Defensive in nature, Telecom and Utilities had the best week in that they were the only two major sectors that limited weekly losses to less than 1%.
Treasuries, a favorite safe haven among investors, traded higher once again. In fact, the yield on the benchmark 10-year Note dropped to a record low near 1.44% amid aggressive selling in the early going. It gradually eased up from that mark as trade progressed.
The dollar forfeited and early gain to end the session with a loss of about 0.2% against a basket of major foreign currencies, namely the euro, which rallied to a 0.5% gain against the greenback. The euro’s bounce came after it briefly fell beneath $1.23 to set its lowest level in nearly two years.
Although the Volatility Index eventually eased back, it pushed up to a 2012 high narrowly above 26 amid the stock market’s initial flush.
..Nasdaq 100 -2.6%. ..S&P Midcap 400 -3.2%. ..Russell 2000 -3.1%.
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