Holiday shortened session leaves stocks mostly positive following mixed economic news. The Dow ($INDU) gained 73.03 points Thursday to close the session at 11,288.54. The S&P 500 ($SPX) added 1.38 points to 1,262.90. The Nasdaq ($COMPQ) lost 6.08 points to 2,245.38. Volume was light on the session with 932 million shares traded on the NYSE and 607 million shares exchanged on the Naz. Market breadth was negative by an 8-to-23 and 10-to-17 margin on the Big Board and Naz respectively.

There were several stories Thursday for traders to digest, but the main focus was the June employment report. Nonfarm payrolls fell by 62,000 during the month, a bit below estimates for a decline of 50,000. However, considering the weakness in the ADP Employment report on Wednesday, today’s data was a relief. The unemployment rate remained at 5.5 percent and average hourly earnings rose an as expected 0.3 percent.

Jobless claims for the prior week were a disappointment, showing a rise above 400K with the four-week moving average above 390K. This points to further weakness in the future and could keep payrolls in negative territory in the months to come. The other negative Thursday came from the ISM Non-Mfg. Survey, which fell into contraction territory. This index declined to 48.2 in June with a reading below 50 a sign of contraction. This data was interesting considering the ISM Mfg. Survey moved above 50 during the month. Economists are concerned about the sharp drop in the employment component and the rise in the prices paid index.

Shares of Nvidia (NVDA) fell sharply Thursday, down 30.73 percent to $12.49. The graphics chip maker warned that quarterly earnings would fall well short of expectations and that gross margins would not recover like initially stated. Due to this news, the stock fell to nearly a two-year low.

Despite gains Thursday, the Dow closed the week more than 20 percent below its high in October. This is the definition of a bear market with the Naz also in a similar situation. The SPX is within 12 points of falling into bear market territory; something that could occur next week. Of course, with the second quarter ending, traders will start to turn their attention to earnings and this could either lead to capitulation or help the bulls turn around an oversold market.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site