US markets end mixed

Technology sector tries to offset the weakness in the energy and financial sectors

US Market practically ended unchanged today, Wednesday, 04 June 2008 after technology sector tried utmost to offset the weakness in the financial and the energy sectors. Ben Bernanke’s speech before Harvard also stocks tumbling in the mid session hours. Telecom was also a noted laggard today following reports of a large buyout in the sector. Five of ten sectors posted gains today. Technology sector was the largest gainer while energy was the largest loser.

The major indices open with slight losses, as a better-than-expected private employment reading and an upward revision to first quarter productivity was not enough to lift investor sentiment in the early going. In the middle hours, market tried recovering after Moody’s decided to review the two bond insurers’ - Ambac and MBIA’s credit ratings. At the end, the Dow Jones industrial Average ended the day with a loss of 12.3 points at 12,390. The Nasdaq Composite Index, finished higher by 22.6 points at 2,503. S&P 500 finished lower by 0.45 points at 1,377.2.

Fifty percent of the thirty Dow stocks ended in the green today. General Motors together with other financial stocks like JP Morgan, Citigroup and Banc of America were the largest losers. Walt Disney, Intel and American Express were the main Dow laggards.

There were quite a few economic reports on the dock today. All were better than expected but were not very dictating. Employment services firm, ADP reported that private nonfarm employment rose by 40,000 in May. This came out ahead of the expected drop of 30,000.

First quarter nonfarm productivity was revised to a gain of 2.6% from 2.2% as against a consensus figure of 2.5%.

Also, May (Institute of Supply Management) ISM services - a survey of nonmanufacturing purchasing managers - was nearly unchanged at 51.7 compared to 52 in April. Market had forecast a reading of 51. Because the reading is above 50, it indicates the services sector is expanding.

Financials got badly hammered today after headlines crossed the wires that Moody's has placed Ambac's Aaa insurance financial strength rating on review for a possible downgrade.

The stock market fell to session lows on the release of Fed Chairman Bernanke's prepared text for his Harvard speech. Bernanke said inflation is "significantly higher" than the Fed wants, and that price stability is "a top priority" of the Fed. He noted that there is no sign of the 1970s-type price wage spiral.

Bernanke also added, "If people expect an increase in inflation to be temporary and do not build it into their longer-term plans for setting wages and prices, then the inflation created by a shock to oil prices will tend to fade relatively quickly."

Crude oil prices registered another drastic drop. The weekly inventory report from the Energy Department was the main reason behind this. The dollar also remained modestly strong today after Federal Reserve Chairman Ben Bernanke yesterday signaled he's finished cutting U.S. borrowing costs for now thereby boosting the dollar. Crude prices dropped more than 2% today after dropping almost 4% yesterday. Crude-oil futures for light sweet crude for July delivery today closed at $122.31/barrel (lower by $2.01/barrel or 1.6%) on the New York Mercantile Exchange.

As per the weekly inventory report by the Energy Department, crude supplies dropped by 4.8 million barrels to 306.8 million for the week ended 30 May. As per the data, supplies have fallen a total of 19 million barrels in three weeks.

Volume on the New York Stock Exchange topped 1.3 billion, while more than 946 million shares changed hands on the Nasdaq. Declining stocks outran those advancing nearly 8 to 7 on the NYSE, and by about 4 to 3 on the Nasdaq.

For tomorrow, the economic calendar focuses on the weekly initial jobless claims report. Also on the agenda will be May same-store sales from chain retailers.