US stock indexes extended losing their streak Thursday, dropping to their lowest levels since 2010 with the blue-chip Dow halting its winning streak in May. Investor sentiment sank following a report from payroll-services firm ADP that showed US companies added fewer jobs in May than the forecasted 157,000. At 133,000, unemployment rate is expected to remain unchanged at 8.1 percent in May.
US Treasuries rallied on fears that the economy is slowing down after as latest data showed the number of people filing for first-time unemployment benefits rose more than expected. Yields on Five-, seven-, and 10-year securities slipped to fresh all-time lows, as demand for safe haven assets spiked amid fears that the European crisis is deepening.
The benchmark 10-year yield cut losses after a report suggested that the International Monetary fund started discussions on contingency plans to save Spain’s banking industry while support for Greece’s pro-bailout party increased. At this point, it’s all chatter about a Spain bank rescue, but we will know soon if there are hard facts backing up the rumor mill.
The barometer for manufacturing activities in the Midwest, the Chicago Purchasing Managers Index, dropped unexpectedly to 52.7 against a forecast of 57, the lowest since May 2009.
After a wild ride, see chart above, the Dow Jones Industrial Average (DJIA) shed 0.2 percent, off 6.2 percent for the month. 16 of the 30 companies in the blue-chip index closed lower.
The S&P 500 Index (SPX) slipped 0.2 percent, down 6.3 percent for May. Only utilities in the 10-sector index closed lower.
The NASDAQ Composite Index (COMP) dropped 0.4 percent to close at 2827.34, off 7.2 percent since the end of April.
The yield on the benchmark 10-year notes dropped five basis points to a new low of 1.57 percent. Earlier the yield had dropped to 1.53 percent after weekly jobless claims came in higher than anticipated. The 30-year bond yield dropped six basis points to 2.65 percent.
ETFs in the news:
The iShares Barclays 20 Year Treasury Bond ETF (TLT) emerged one of the top gainers for the day, adding 1.16 percent for the day. As Europe witnesses near unprecedented turmoil, investors rushed to the relative safety of bonds, pushing prices up. According to fixed income experts, the US 30-year yield may drop further as contagion fear grows, which means there is still upside potential.
Nonetheless, after days of negative developments, Europe delivered some positive news today. The IMF has started discussions on bailing out Spain’s struggling banks which may exceed EUR 100 billion.
This alone was good enough to push the region’s funds up with the iShares MSCI Italy Index Fund (EWI) gaining 0.9 percent for the day. The iShares MSCI France Index Fund (EWQ) rose 0.8 percent, while the iShares MSCI Spain Index Fund (EWP) ended 0.5 percent higher.
The Global X FTSE Greece 20 ETF rose 2.11 percent over new poll results that showed Greece’s pro-austerity party gaining lead ahead of next month’s elections.
The United States Oil Fund (USO) remained among the day’s top losers, shedding 1.24 percent for the day. As oil futures price continue to slide over EZ worries, energy related funds suffer on recession worries.
The Barclays iPath Dow Jones-UBS Natural Gas Total Return Sub-Index ETN (GAZ) lost 1.95 percent for the day. This once premium-laden product has lost a whopping 28 percent in May, trading close to its 52-week low though natural gas rose 4 percent for the month, showing this product is still premium rich.
Our Trend Tracking Indexes (TTIs) changed only slightly from yesterday and are showing the following positions:
Domestic TTI: +2.17%
International TTI: -5.10%
For more details, as well as the latest momentum numbers, please see my updated weekly StatSheet due out to be posted by 6:30 pm PST.
Disclosure: Holdings in TLT