Global banks tried to give the market what it was looking for, but investors were having none of it. Finally, several central banks gave into economists and investors, and cut interest rates, or acted in a way that should provide a boost to their respective economies. The European Central Bank cut its main interest rate even further, to a record low of 0.75% from 1.00%. China’s central bank similarly cut interest rates, both its benchmark lending rates and deposit rates, for the second time in a month. Lastly, the Bank of England announced a $78 billion increase to its bond buying stimulus program.
All of these measures are meant to benefit the global economy, and yet the S&P 500 (INDEX: ^GSPC) dropped 0.46%, while the Dow Jones Industrial Average (INDEX: ^DJI) was down 0.36% after market close. While economists expected the Bank of England’s move and, to some extent, further rate cuts by the European Central Bank, China’s loosening of monetary policy came as a surprise and should have moved the markets. So what’s going on here?
Looks like investors are interpreting these moves as a sign that these authorities are more alarmed about the world economy than previously thought, and felt the need to act sooner than expected. Also, investors had likely already priced in the changes announced by the Bank of England and the European Central Bank.
What should investors expect looking forward? That’s going to depend on jobs, jobs, jobs. Some positive numbers were announced today. Applications for jobless benefits fell 14,000 last week to 374,000, below expectations of 385,000, and reaching the lowest level in six weeks. In addition, the June ADP labor report smashed expectations, as private sector payrolls rose 176,000 jobs instead of the expected increase of 100,000 jobs. And yet, pessimism pervades expectations for tomorrow’s announcements, which include the June Non-Farm Payroll report and June unemployment data. With positive indicators coming out today, perhaps we are in for a surprise and a jumping market tomorrow. Either way, it seems like investors were not ready to bet either way ahead of tomorrow’s reports. Make sure to follow that announcement at 8:30 AM.
Market in Focus
Apple (Nasdaq: AAPL) surged past the $600 mark to nearly $610, up 1.8% on the day, and reaching its highest price since April. Speculation over the release of a new 7-inch iPad Mini fueled the charge. Investors hope it will counter the smaller tablets of Google and Amazon, as well as Microsoft’s new Surface, although the device would inevitably cannibalize some of the iPad’s dominant market share.
Netflix (Nasdaq: NFLX) shot up 13.4% on the day, after CEO Reed Hastings announced that subscribers had watched more than 1 billion hours of video in June. Building on a 7% jump on Tuesday, Netflix shares have somewhat regained their footing, almost reaching 20% year-to-date after being in the red earlier in June. The online entertainment company leads the S&P 500 gainers today.
Shares of Genworth Financial (NYSE: GNW) posted the second largest loss of all S&P 500 components, dropping 4.75%. Shares jumped over 10% last Thursday following news that hedge fund Highfields Capital Management upped its stake in the insurance and financial services company.
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