Wednesday's Shortened Stock Market Session Brings Modest Advance

The overthrow of Mohamed Morsi in Egypt stole attention away from the surprisingly better-than-expected ADP National Employment Report for June. Wednesday’s abbreviated stock market session left no opportunity for a “relief rally” which would have resulted from the reduced threat of Mideast oil supply disruption, which had been spooking global stock markets all week.

ADP reported that 188,000 private sector payroll jobs were added in June, beating expectations for an increase of 165,000 new jobs.

The Dow Jones Industrial Average (DIA) gained 56 points to finish Wednesday’s shortened trading session at 14,988 for a 0.38 percent advance. The S&P 500 (NYSEARCA:SPY) edged upward by 0.08 percent to close at 1,615.

The Nasdaq 100 (QQQ) rose 0.40 percent to finish at 2,941. The Russell 2000 (IWM) advanced 0.16 percent to end the day at 991.

In other major markets, oil (USO) soared 1.79 percent to close at $35.84.

On London’s ICE Futures Europe Exchange, August futures for Brent crude oil advanced by $1.57 (1.52 percent) to $105.05/bbl. (BNO).

August Gold Futures advanced by $9.20 (0.74 percent) to $1,252.60 per ounce (GLD).

Transports stalled out on Wednesday, with the Dow Jones Transportation Average (IYT) declining 0.34 percent.

In Japan, the Topix index was able to extend its rally to a fifth consecutive day on Wednesday, although the Nikkei 225 Stock Average was in the red almost immediately after the opening bell, only to remain there all day. The Markit Japan Services PMI fell to 52.1 in June from 54.8 in May. Markit’s Composite Output Index for Japan fell from May’s record reading of 54.1 to 52.3 in June. The Nikkei 225 Stock Average declined 0.31 percent to 14,055 (EWJ). The Nikkei was stuck in the red despite the fact that the yen remained weaker than 100 per dollar throughout most of the session, dropping as low as 100.86 per dollar. The yenny has returned. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY).

In China, the financial sector led the decline on Wednesday after the official non-manufacturing PMI fell to 53.9 in June from 54.3 in May according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing (CFLP). China’s Construction PMI sank 2.9 percent to 59.3 percent in June, according to the CFLP report. Worse yet, the HSBC China Services PMI dropped into the range of contraction in June, falling to 49.8 from 50.09 in May. A reading below 50 indicates contraction. The Shanghai Composite Index declined 0.61 percent to close at 1,994 (FXI). Hong Kong’s Hang Seng Index took a 2.48 percent nosedive to finish the session at 20,147 (EWH).

European stocks had a tough time on Wednesday as the excitement in Egypt raised oil prices, increasing worries about the liklihood of a recovery from the Eurozone recession (VGK). Portugal’s fracturing government added to the day’s stress. Beyond that, a number of European banks, such as Barclays Plc, Deutsche Bank AG and Credit Suisse Group AG had their credit ratings lowered by Standard & Poor’s. Barclays and Deutsche Bank had their credit ratings cut to A from A+, and Credit Suisse was cut to A- from A.

The final Markit Eurozone Composite PMI for June remained above May’s result, while declining from the flash reading. The Final Eurozone Composite Output Index was 48.7, compared with the flash reading of 48.9 and May’s 47.7. The Final Eurozone Services Business Activity Index was 48.3, compared with the flash reading of 48.6 and May’s 47.2.

The Euro STOXX 50 Index finished Wednesday’s session with a 1.25 percent drop to 2,570 – remaining far below its 200-day moving average of 2,634. Its Relative Strength Index is 38.94 (FEZ).

Technical indicators reveal that the S&P 500 remains below its 50-day moving average of 1,624 after closing at 1,615. The 50-day MA continues to provide significant overhead resistance. As a result, bears are anticipating a decline to the 200-day moving average of 1513. Its Relative Strength Index increased from 49.10 to 49.52. Although the MACD remains below the zero line, it is now superimposed over the signal line and poised to cross above it. If it does so, the move would suggest a likely advance.

For Wednesday, the sectors were split 5 to 4, with 5 in negative territory. (Curiously, by pure coincidence, the positive sectors are at the top of our list and the negative sectors are below.) The technology sector made the biggest gain, with a 0.22 percent advance. The utilities sector took the hardest hit, falling 0.38 percent.

Consumer Discretionary (XLY): +0.46%

Technology: (XLK): +0.58%

Industrials (XLI): +0.05%

Materials: (XLB): +0.03%

Energy (XLE): -0.06%

Financials: (XLF): -0.31%

Utilities (XLU): -0.38%

Health Care: (XLV): -0.15%

Consumer Staples (XLP): -0.20%

Bottom line: The major stock indices made modest gains during Wednesday’s abbreviated session, as the better-than-expected ADP National Employment Report was upstaged by the overthrow of Mohamed Morsi in Egypt.

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