US Markets recover after zig zag movement

Stocks take a reverse course after GM announces much less than expected drop in June sales

US Market struggled today, Tuesday, 01 July, 2008 until General Motors reported its June sales results in the mid-afternoon. The sales data gave a much wanted lift to the major indices, which closed near their best levels of the session. Earlier in the day, encouraging economic data provided stocks with a boost but the gains, were limited as investors returned their focus to an uncertain financial sector and high oil prices

After being down by more than 135 points earlier during the day, The Dow Jones industrial Average ended the day with a gain of 32.25 points at 11,382.26. The Nasdaq Composite Index, finished higher by 11.99 points at 2,304.97. S&P 500 finished higher by 4.91 points at 1,284.91.

The GM stock was one of the main winners of Dow for the day. The stock soared as high as 15% today and ultimately closed higher by 2%.

General Motors reported that its sales in North America declined 8.3% in June versus a market expectation that they would decline 21%. Its competitors Toyota and Ford reported more drop in sales as against GM’s. Market took this piece of report with utter joy.

Ford Motor Company reported its North American auto sales during June fell 28.1% year-over-year. Ford has been hit hard by the slowing economy and rising fuel costs.

In economic news, the latest Institute of Supply Management (ISM) Index indicated that manufacturing activity expanded during June, coming in at 50.2 and topping the 48.5 figure that was widely expected. The report showed that there was expansion in activity.

Additionally, May construction spending fell 0.4% month-over-month. Market had forecast a 0.6% downturn. More importantly, nonresidential construction spending was up 0.2% in May, which follows a 1.6% increase for April.

Crude futures rose today as the dollar fell. Prices rose on concern that Israel may attack Iran over its nuclear program and disrupt supply from OPEC's second-largest producer. Crude-oil futures for light sweet crude for August delivery today closed at $140.97/barrel (higher by $0.97/barrel or 0.7%) on the New York Mercantile Exchange. Prices rose to a high of $143.33 earlier during the day. Crude prices gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years.

Today, the IEA (International Energy Agency) said in a report that spare OPEC capacity will shrink by 2013, keeping the market tight. In its Medium-Term Oil Market Report today, IEA reported that OPEC spare capacity will rise from 2.5 million barrels a day in 2008 to more than 4 million a day in 2010 before fading to negligible levels of around 1 million barrels a day by 2013.

International Energy Agency also said that supplies might not keep up with demand through 2013. The IEA, the Paris-based adviser to 27 oil-consuming nations, cut more than 3 million barrels a day from its 2012 global demand forecast. The IEA lowered demand forecasts for the years 2009 to 2012, citing weaker economic growth and the sharp rise in oil prices as factors curbing oil consumers' appetites.

Economic data will be the area of focus tomorrow. Latest inventory report from the Department of Energy and the ADP employment report are the first things in the morning.