US stock markets, beaten down by negative economic reports, will have a holiday-shortened week to regroup before the company earnings season gets underway.
Over the past week, the Dow Jones Industrial Average shed 4.51 percent, closing on Friday at 9,686.48 points, its lowest level since Oct. 5.
The tech-heavy NASDAQ composite index dropped 5.92 percent to 2,091.79 points. The Standard & Poor’s 500 index, a broad measure of the markets, slumped 5.03 percent to 1,022.58 points.
US markets will be closed tomorrow in observance of the Independence Day holiday.
Only one key economic report is due in the holiday-shortened week: the Institute for Supply Management’s index on activity in the services sector, on Tuesday.
The major market indices spent this week mired in red, under pressure from a slew of poor economic indicators.
“It was one ugly week, and the recent data raises serious questions about the overall state of the economy,” Ryan Detrick at Schaeffer’s Investment Research said.
The US Labor Department’s jobs report on Friday did not help to dampen recovery fears.
The economy shed 125,000 jobs, more than expected, while the unemployment rate fell to 9.5 percent from 9.7 percent as more than a half million workers exited the workforce.
Most analysts had expected it to rise to 9.8 percent.
“The unemployment rate dropped because the labor force shrank even more rapidly as discouraged workers stopped looking for work,” analysts at Societe Generale said.
Patrick O’Hare, chief market analyst at Briefing.com, said that several indicators are flashing warning signs that an economic slowdown is on the way.
“We see a slowdown coming, but we do not see another recession,” he said. “The feeling of negativity in the market is palpable, which is why one needs to respect the possibility of a counter-trend rally of decent size in the near term that is fueled by short-covering activity.”
Lindsay Piegza at FTN Financial called last month “a pretty bad month.”
“We basically stalled. We’re not falling off a cliff but we slowed from the two previous months,” Piegza said.
The blue-chip Dow plunged 10 percent in the April-June period, the first quarterly decline since the indices rebounded from March last year’s lows.
“This does not bode well for starting out into the second half of the year. We’ve initiated a new trend,” Piegza added.
Investors will have the week to prepare for the unofficial start of earnings season on July 12, when Alcoa reports results.
“With corporate balance sheets — particularly stateside — in good shape and with dividend trends on the rise, opportunities for investors to be paid while they wait appear attractive,” John Stoltzfus of Ticonderoga Securities said.
“The message looks clear: Spare the party hats for now, keep the seat belts fastened, make shopping lists and keep an eye out for babies that’ve been and will continue to be thrown out with the bath water on down days,” Stoltzfus said.
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