Mid-Day Market Recap: Stocks Stagnate As Markets Await New Guidance

Stocks were trading lower in the first hour of trading on Thursday, but relative to the 6.1% gain seen in the first three days of the week, the sell-off is pretty minor. By noon, indexes have mostly recovered from the morning’s mixed news.

Almost three hours into the trading session, the S&P 500 is down 0.10% to 931. The NASDAQ is slightly higher, trading 0.23% up at 1867, and the Dow is 0.12% higher at 8626.

Data this morning has been mixed: JP Morgan earnings were lifted by investment bank fees, and jobless claims fell to their lowest level since January, but TIC flows indicated foreign divestment, and a regional manufacturing report halted four months of improvement. 

Prior to the open, the nation’s second largest bank reported higher earnings than expected. JP Morgan Chase reported earnings per share of 28 cents, compared to expectations of just 4 cents, as revenue from underwriting debt and trading stock outweighed problems in the credit card sector.

CEO Jamie Dimon said in a statement that profits “were negatively affected by the continued high levels of credit costs in consumer lending and card services, which we expect will remain elevated for the foreseeable future.”

At 8:30, a weekly labor report showed initial and continuing jobless claims each fall well below expectations. Initial claims fell to 522k, marking their second week below the 600k threshold following 22 weeks above that level. Even more dramatic, continuing claims fell more than 600k from an all-time high to 6.273 million. 

“Most analysts are putting a ‘seasonal adjustment’ spin on the latest weekly jobless claims,” noted analysts at Herrmann Forecasting. “We are not, and we reiterate, our models are pointing to a -331.0k outcome for non-farm payrolls for the month of 

July versus the month of June’s outcome of -467.0k.”

The morning’s optimistic news stops there, however.

At 9:15, the TIC flows report for May indicated a net outflow of nearly $20 billion in longer-term securities, as foreigners ― particularly, foreign official institutions ― were selling off Treasuries.

“The pace of foreign flows into U.S. securities was deeply depressed in May, as foreign selling of U.S. securities actually led to a net divestment in the headline figure,” said TD strategist Charmaine Buskas. “Though this is the first net divestment in the TIC flows since January 2009, it is completely understandable in the context of what was going on in the bond market in May. It is unlikely that the sell off in Treasuries will completely unwind when the June data comes out, but flows might improve.”

Finally, at 10 am, the Philadelphia Fed’s Business Outlook survey failed to follow in the optimistic footsteps of the NY Fed survey on Tuesday. Manufacturing conditions deteriorated from -2.2. in June to -7.5 in July, with all 10 components in the negative zone.

“Declines in the region’s manufacturing sector continued this month, although declines were not as large as those registered over most of the first half of the year,” the report said.

Later in the day, at 1 pm, markets will receive the latest sentiment survey for homebuilders. The index is unlikely to move markets in either direction, but some analysts believe it could rebound.