Treasuries were battered today as thin trading and a bullish economic indicator left the market with no support. The stocks indices struggled throughout their session but two of the three major indices managed to close in the green and the other took a nominal loss. In late trading, the 10-Year Treasury Note was down by 22/32, raising its yield to 5.14%; the Dow was down by 11.46 points to 13,565.84; and the Nasdaq was up by 11.70 points to 2,656.65.A key news item was the ISM Services Index for last month. It showed a stronger than expected expansion of activity in the sector and it followed Monday's stronger than expected ISM Index on the manufacturing sector.
Bond traders were also disheartened by news on the employment situation. The jobless claims report roused no concerns since the change in the initial claims level was little changed last week. But a report from the payroll services firm of Automatic Data Processing Inc. (ADP) said that, according to its data, non-government payrolls grew by 150,000 jobs last month.
Though the ADP data has a poor record of correlation with the monthly employment report figures, today's report suggested that tomorrow's payroll number could be stronger than the 125,000 to 135,000 (including government jobs) that forecasters have predicted.
The ISM Services news and the ADP report were positives for stocks but stock traders were also cautious ahead of tomorrow's employment report. Moreover, oil futures rose again today, even though the latest inventory report indicated rising supply. The Energy Department reported that inventories of crude oil rose last week by 3.151 million barrels (one barrel equals forty-two gallons). Supplies were 5.2% higher than they were a year earlier, the best year-over-year margin since the week ending December 12.
Inventories of gasoline rose by 1.851 million barrels. Though they were still 4.7% lower than a year earlier, this was the smallest Y/Y shortfall since the week of April 6. Distillates, which include diesel and heating fuel, rose by 1.162 million barrels but were 6.1% below year-ago levels, the worst margin in fifteen weeks.
But the price of a barrel of light, sweet crude oil for next month delivery rose by $0.40 on the New York Mercantile Exchange to settle at $71.81. Although the closing price was down from an intra-session high of $72.35, it was a sixth consecutive session increase and it was the highest close for a front month contract in over ten months.
High energy prices are a negative for stocks since they crimp business and consumer spending in other areas of the economy. Nevertheless, The Dow's decline was only 0.08% today. The S&P 500 rose by 0.03%. The tech-heavy Nasdaq rose by 0.44% with the help of gains in Apple, Google, and Research in Motion. The Nasdaq's close was the highest in six years and five months.
Tomorrow, the only major economic release is the often market-moving employment report. In May's report, the Labor Department said the seasonally adjusted level of nonfarm payrolls rose 157,000. This was a forty-fifth consecutive expansion. It also topped projections of a 140,000 increase, though revisions to the preceding two months trimmed their gains by a total of 10,000. For June, the consensus prediction is for a gain of 135,000. The unemployment rate, the portion of the active workforce without jobs, is expected to have remained at 4.5% for a third consecutive month.
