The Labor Department reported that nonfarm payrolls rose by a slim 69,000 in May, the fewest since May 2011 and significantly below expectations. In addition the April payroll figure was revised downward to 77,000 from 115,000. The unemployment rate rose to 8.2% from 8.1%, as the labor participation rate rose slightly to 63.8 versus the April all time low at 63.06. Personal Income rose just 0.2% in April with Spending up 0.3%. Construction Spending rose by 0.3% in April. The ISM Manufacturing Index came in at 53.3 in May down from 54.8 in April. The Dow Industrial Average traded down to 12,110.77 going into the final half hour of trading below its 200-day simple moving average at 12,254.88. The NASDAQ traded down from 2810.13 to 2747.59 going into the final hour of trading below its 200-day simple moving average at 2758.
Asian stocks were lower again on Friday. The Nikkei 225 ended the day at 8,440 – down 1.20%. The Hang Seng ended the day at 18,558 – down 0.38%. European exchanges were mixed early but ended lower on Friday. The FTSE 100 ended the day at 5,260 – down 1.14%. The DAX ended the day at 6,050 – down 3.42%. The CAC 40 ended the day at 2.950 – down 2.21%. The yield on the 10-Year US Treasury declined to another record low of 1.439% on Friday in reaction to the news that the May employment was much weaker that expected.
Gold traded down from $1562.9 the Troy ounce to $1548.6 then jumped to $1632.0 testing the base of the “Death Cross” 50-day and 200-day simple moving averages at $1623.6 and $1688.3. Crude oil traded down from $86.59 per barrel to another new year to date low at $82.29 on the notion that the US economy is weaker than expected. The euro versus the dollar traded to a new year to date low at 1.2291 then rebounded to 1.2447.
BP (BP) might sell its lucrative 50% stake in its TNK-BP Russian joint venture as they review proposals from potential suitors. BP has received $19 billion in dividends from TNK-BP since the joint venture was formed in 2003, and a sale could fetch $15 billion. According to Reuters, Exxon Mobil (XOM) will build a multi-billion dollar chemical plant in Texas in order to take advantage of cheap North American shale gas. The plant could be up and running in 2016 to sharply boost Exxon's chemical production so that they can better compete with rival Dow Chemical (DOW). Tesoro (TSO) has been upgraded to Buy from Neutral at UBS. Dow components – Chevron (CVX) down 1.65%, Exxon Mobil (XOM) down 0.47%.
Energy Select Sector SPDR (XLE) was trading at $62.12 at 3:30 PM on Friday, down 2.37% on the day – down 10.14% year-to-date.
According to Reuters, Exxon Mobil (XOM) will build a multi-billion dollar chemical plant in Texas in order to take advantage of cheap North American shale gas. The plant could be up and running in 2016 to sharply boost Exxon's chemical production so that they can better compete with rival Dow Chemical (DOW). Dow components – Alcoa (AA) down 1.75%, DuPont (DD) down 1.49%.
The Materials Select Sector SPDR (XLB) was trading at $33.15 at 3:30 PM on Friday, down 1.98% on the day – down 1.04% year-to-date.
Dycom (DY) has been initiated with an Outperform rating at Imperial Capital with a $24 price target. Tenaris (TS) has been downgraded to Underperform from Neutral at Credit Suisse. Dow components – Boeing Co (BA) down 3.00%, Caterpillar (CAT) down 1.49%, General Electric (GE) down 2.05%, 3M Company (MMM) down 1.54%, United Technologies (UTX) down 2.17%.
The Industrial Select Sector SPDR (XLI) was trading at $33.73 at 3:30 PM on Friday, down 2.71% on the day – down 0.06% year-to-date.
Ascena Retail Group (ASNA) missed FQ3 EPS estimates by two cents with a miss on the revenue line and shares declined 3.6% in after hours trading on Thursday. Domino’s Pizza (DPZ) has been initiated with a Neutral rating at Goldman Sachs. Conn’s Inc. (CONN) the specialty electronics store has been initiated with an Overweight rating at Piper Jaffray. Mattress Firm Holding (MFRM) has been initiated with an Overweight rating at Piper Jaffray. Lions Gate Entertainment (LGF) the company behind the films Hunger Games and Mad Men has been upgraded to Outperform from Sector Perform at RBC Capital. Zynga (ZNGA) has been upgraded to Neutral from Underperform at Sterne Agee. Dow Components – Disney (DIS) down 2.38%, Home Depot down 1.86%, McDonalds (MCD) down 2.22%.
The Consumer Discretionary Select Sector SPDR (XLY) was trading at $41.72 at 3:30 PM on Friday, down 3.20% on the day – up 6.92% year-to-date.
Despite the stock trading at a 52-week high, expect some fireworks at Wal-Mart's (WMT) annual shareholders meeting today. Some large investors and employee shareholders are calling for the company's CEO and its chairman to be removed from the board as a result of their alleged involvement with the Mexican bribery scandal. Nordstrom (JWN) has been resumed with an upgrade to Outperform at RBC Capital. Clorox (CLX) has been upgraded to Buy from Neutral at Citigroup. Nordstrom (JWN) has been upgraded to Buy from Neutral at Nomura. Kohl’s Corp (KSS) has been downgraded to Neutral from Overweight at Atlantic Equities citing increased competitive pressure. Dow components – Kraft (KFT) down 1.28%, Coca Cola (KO) down 1.66%, Procter & Gamble (PG) down 1.53%, Wal-Mart (WMT) down 0.30%.
The Consumer Staples Select Sector SPDR (XLP) was trading at $33.17 at 3:30 PM on Friday, down 1.81% on the day – up 2.09% year-to-date.
Sanofi (SNY) has a multiply sclerosis drug called Aubagio, which showed positive results in a Phase III trial. The drug significantly reduced the annual relapse rate in patients. Health information company WebMD (WBMD) named Cavan Redmond as its new CEO. Redmond was a Group President at Pfizer (PFE). Celldex Therapeutics (CLDX) has been initiated with a Buy rating at ThinkEquity. NewLink Genetics (NLNK) has been initiated with a Buy rating at Canaccord Genuity. ArthroCare (ARTC) has been upgraded to Outperform from Market Perform by William Blair. Dow Components – Johnson & Johnson (JNJ) down 0.90%, Merck (MRK) down 1.14%, Pfizer (PFE) down 1.10%.
The Health Care Select Sector SPDR (XLV) was trading at $35.52 at 3:30 PM on Friday, down 1.74% on the day – up 2.39% year-to-date.
According to the Wall Street Journal, the CFTC has new authority through the Dodd-Frank Act and they are using this power oversee the derivatives market, and thus widen its inquiry into JP Morgan's (JPM) more than $2 billion loss. The CFTC will investigate whether or not traders deceived their managers as losses started to grow, might have committed fraud. Bank of Marin Bancorp (BMRC) has been initiated with a Buy rating at Stifel Nicolaus with a $43 price target. First Busey Corp (BUSE) has been upgraded to Market Perform from Underperform at Raymond James. Dow Components – American Express (AXP) down 4.39%, Bank of America (BAC) down 4.22%, JP Morgan Chase (JPM) down 3.32%, Travelers (TRV) down 2.19%.
The Financial Select Sector SPDR (XLF) was trading at $13.50 at 3:30 PM on Friday, down 3.64% on the day – up 3.85% year-to-date.
Google (GOOG) may be creating another search controversy the FTC might not like. Starting this fall, results shown by Google’s search engine will be influenced by how much retailers and advertisers pay. Currently Google only generates income from ads that are clearly distinct from the search results. OmniVision Technologies (OVTI) missed FQ4 EPS estimates by two cents with better than expected revenue, and shares traded down 5.1% in after hours trading on Thursday. Facebook (FB) has been initiated with an Outperform rating at Robert W. Baird with a $37 price target. Baird believes that despite near-term headwinds from the shift to mobile and sluggish social game trends, Facebook represents an attractive long-term play in advertising, digital media, payments, and e-commerce. Check Point Software (CHKP) has been upgraded to Buy from Hold at Wunderlich with a $60 price target. The recent introduction of a unified R75.4 and GAiA operating system and IPv6 adoption offer two potential catalysts. Hewlett-Packard (HPQ) has been downgraded to Hold from Buy at Jefferies lowering the price target to $23 from $30. Taiwan Semiconductor (TSM) hase been downgraded to Underperform from Hold at Jefferies. Dow Components – Cisco Systems (CSCO) down 1.81%, Hewlett-Packard (HPQ) down 3.95%, IBM (IBM) down 1.43%, Intel Corp (INTC) down 2.09%, Microsoft (MSFT) down 1.66%.
The Technology Select Sector SPDR (XLK) was trading at $27.25 at 3:30 PM on Friday, down 2.42% on the day – up 7.07% year-to-date.
Sprint Nextel (S) has been upgraded to Overweight from Neutral citing stable industry pricing and potential M&A. Leap Wireless (LEAP) has been downgraded to Underperform from Market Perform by BMO Capital. Dow components – AT&T (T) down 0.50%, Verizon (VZ) down 1.22%.
The NASDAQ Telecommunications Index (IXTC) was trading at $175.40 at 3:30 PM on Friday, down 2.33% on the day – down 10.93% year-to-date.
Dominion Resources (D) down 0.48%, Edison International (EIX) down 0.76%, First Energy (FE) down 0.32%, PG&E Corp (PCG) down 0.07%, Southern Company (SO) up 0.30%.
The Utilities Select Sector SPDR (XLU) was trading at $35.71 at 3:30 PM on Friday, down 0.42% on the day – down 0.75% year-to-date.
STOCKS: CVX, XOM, BP, TSO, AA, DD, DOW, BA, CAT, GE, MMM, UTX, DY, TS, DIS, HD, MCD, ASNA, DPZ, CONN, MFRM, LGF, ZNGA, KFT, KO, PG, WMT, JWN, CLX, KSS, JNJ, MRK, PFE, SNY, WBMD, CLDX, NLNK, ARTC, AXP, BAC, JPM, TRV, BMRC, BUSE, CSCO, HPQ, IBM, INTC, MSFT, GOOG, OVTI, FB, CHKP, TSM, T, VZ, S, LEAP, D, EIX, FE, PCG, SO
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