Wall Street bounced off its lows and alternated between gains and losses Wednesday morning as a gloomy ADP report on private-sector job growth was offset by a more upbeat regional report and a rallying euro.
As of 10:30 a.m. ET, the Dow Jones Industrial Average fell 2.72 points, or 0.03%, to 9867.73, the Standard & Poor's 500 rose 1.74 points, or 0.17%, to 1042.98 and the Nasdaq Composite picked up 6.89 points, or 0.33%, to 2142.30. The FOX 50 dropped 0.40 points, or 0.05%, to 761.33.
In a reversal of the news flow for much of this year, upbeat overseas news on the European banking system was overshadowed by the gloomy labor headlines on the domestic economy. However, the bearish data may have already been factored into the beaten-down markets, especially considering Tuesday’s 268-point plunge.
“There’s a fairly large disconnect between what the economists are looking for and what the markets are expecting,” said Nick Kalivas, vice president of financial research at MF Global. “Equities are very oversold and I think that’s providing a little bit of a cushion.”
Still, the sluggish start wasn’t exactly what the bulls had in mind given Tuesday’s steep selloff that was triggered by a wave of global risk aversion amid signs the economic recovery is slowing. The markets were most spooked by an unexpected plunge in consumer confidence in the U.S.
“Can’t catch a break. ADP’s numbers this morning are really underwhelming; further confirmation that the recovery is in question and that the market turn we saw from the beginning of June has been aborted,” Peter Kenny, managing director at Knight Capital Group, said in a note.
Just over half of the Dow's 30 components headed north, led by manufacturing giant 3M (MMM: 79.75, 1.26, 1.61%) and aluminum maker Alcoa (AA: 10.35, 0.012, 0.12%). The index's worst performers were defensive in nature: Kraft (KFT: 28.1366, -0.2934, -1.03%) and Verizon (VZ: 28.26, -0.35, -1.22%).
The Nasdaq Composite posted steadier gains than the broader markets as technology stocks like Amazon.com (AMZN: 111.07, 2.46, 2.26%) and Garmin (GRMN: undefined, undefined, undefined%) bounced back from Tuesday's tumble.
The choppy trading comes as Wall Street marks the end of a bleak second quarter that has seen the Dow tumble 9%, its worst quarterly performance since the first quarter of 2009 and first negative period in a year.
Market sentiment took a hit Wednesday morning after ADP said the U.S. private sector hired just 13,000 new workers in June, widely missing expectations for a gain of 55,000 workers and below May’s gain of 57,000 workers. While it represents the fifth-straight monthly gain for the private sector, the report illustrates the fragile nature of the recovery.
The weaker-than-expected labor report also reinforces the bearish tone on the economy ahead of Friday’s much more important government jobs report. Economists expect that report will show the U.S. lost 100,000 jobs in June and the unemployment rate remained at 9.8%. The bar may have just been lowered, however.
However, Wall Street received a boost from the Institute for Supply Management's Chicago Business Barometer, which came in at 59.1 for June, lower than the 59.7 reading of May but above economists’ forecasts for 59. The index's employment component also rose from 49.2 in May to 54.2 in June.
For a change, Wall Street actually received upbeat overseas news on Wednesday as the results of an European Central Bank lending program showed the European banking system may not be as weak as some had feared. The ECB’s 442 billion euro program only drew 131 billion euros of loans, just half of what the markets had been bracing for.
The lending program results lifted the euro, lowered the cost to insure government sovereign debt and buoyed shares of European banks like HSBC (HBC: 46.15, -0.04, -0.09%) and Deutsche Bank (DB: 57.34, 1.39, 2.48%). The euro jumped 0.85% to $1.2287 in recent trading.
The commodities complex was mixed amid the economic data and stronger euro. Crude oil rose 45 cents a barrel, or 0.59%, to $76.39. Economically-sensitive copper slid 0.38% to $2.9205 a pound. Gold gained $4.00 a troy ounce, or 0.33%, to $1,246.40.
On the earnings front, seed giant Monsanto (MON: 45.465, -1.845, -3.9%) reported weaker-than-expected sales and greeting card company American Greetings (AM: 18.37, -1.15, -5.89%) posted a disappointing quarterly profit.
Monsanto (MON: 45.465, -1.845, -3.9%) said its fiscal third-quarter net income tumbled 45% and its sales slid by a worse-than-expected 6.3% to $2.96 billion. The world’s largest seed producer’s non-GAAP EPS of 81 cents narrowly topped estimates for 79 cents. Monsanto reaffirmed its fiscal 2011 non-GAAP view that would be mostly in line with analysts’ forecasts.
Ford’s (F: 10.38, 0.5, 5.06%) stock jumped 5% as the auto maker said it plans to pay $3.8 billion in cash to a retiree union benefits trust ahead of schedule in an effort to save $470 million in interest payments and strengthened its balance sheet. The auto maker said it was able to make these moves due to “momentum” in its recovery plan and expected “solid profits” and cash flow this year.
Celgene (CELG: 51.63, -1.61, -3.02%) said it plans to acquire Abraxis BioScience (ABII: 74.34, 13.03, 21.25%) for at least $2.9 billion in cash and stock in an effort to enhance its cancer-drug portfolio. The deal implies a premium of 17% on Abraxis’s closing price on Tuesday.
Boeing (BA: 63.92, 0.86, 1.36%) inked a $775 million deal to scoop up defense-equipment company Argon at a 41% premium. Boeing said it plans to pay for the deal with existing cash on its balance sheet.
American Greetings (AM: 18.37, -1.15, -5.89%) missed expectations with EPS of 75 cents, compared to the Street’s view of 79 cents. The greeting card company’s revenue fell 4% to $396.3 million, falling shy of estimates for $416.87 million.
The U.K.'s FTSE 100 lost 0.27% to 4901.13, Germany's DAX dropped 0.12% to 5944.76 and France's CAC 40 slid 0.63% to 3411.41.
In Asia, Japan's Nikkei 225 slid 1.96% to 9382.64 and Hong Kong's Hang Seng sank 0.59% 20128.99.