Stock markets continued to exhibit quite some volatility Thursday. The SP500 closed slightly lower, down 0.23% to 1310.33 points. The Dow Jones Industrial Average and Nasdaq composite lost 0.21% and 0.35% respectively. Markets where quite volatile as the SP500 traded within a 21 point range as markets reacted heavily on news flow from Europe.
Europe
Pressure on Spanish financial markets continued. The market seems to realize that Spain has to ask outsiders to help in bailing out its banks. Rumors about a possible deal for Spanish banks resulted in some hefty intra-day movements. Despite the volatility, yields on Spanish ten year bonds fell to 6.56% after European Central Bank officials indicate that policymakers need to take stronger action soon. ECB President Draghi urged politicians to spell out a credible plan to ease doubt about the future of the currency union. He called for joint support for banks and for countries to give up part of their sovereignty. The flight to safety continued and 10 year German Bund yields fell to a mere 1.20%
Wall Street Opening
Private payroll data picked up slightly in May, as private employers created 133,000 jobs during the month. The number came in below expectations of 148,000, but above the 113,000 new jobs which employers created in the month of April according to payroll processor ADP. The slightly disappointing number is partially attributable to the unusual warm winter, however some economists worry about the impact of the European crisis and the uncertain fiscal outlook. Markets were also disappointed as initial claims for jobless benefits rose 10,000 on the week to 383,000 according to the Labor Department.
Factory activity in the region of Chicago saw lower growth according to the Institute for Supply Management. The reading of the number fell to 52.7 in May compared to 56.2 in April, coming dangerously close to the 50 number which indicates a decline in activity.
Corporate News
Shares of Facebook (FB) had an interesting trading day. Shares hit new lows in the morning to levels below the $27 mark before a strong recovery in the final hours of trading pushed shares 5% higher on the day to $29.60. Traders note that some investors belief the pessimism is an overreaction. Surprisingly enough Morgan Stanley's (MS) Chief Executive Officer James Gorman said that "investors who bought Facebook shares expecting a large short-term increase in the stock where naive". He defended his bankers saying that they did an "excellent" job in the process of bringing the firm public.
Shares in Joy Global (JOY) fell 5% after the manufacturer of mining equipment warned for an order slowdown in the current quarter amidst weak US coal sales and lower demand from China. Shares traded below the $54 level in the morning, trading 8% lower, before a recovery in the wider equity markets softened the pain a bit. The company does however remain optimistic about overseas demand for the longer term. Shares of competitor Caterpillar (CAT) fell 2.8% on the back of the comments.
Gaylord Entertainment Company (GET) ended the day 10% higher at $37.95 per share, the highest level in 2012. Marriott International agreed to buy four hotels from the hospitality company for $210 million in cash. Investors applaud the deal and send shares significantly higher. Shares in Gaylord Entertainment have returned 57% so far this year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
