E-mini Dow Jones Industrial Average

U.S. Stocks Flat as Investors Respond to Upbeat Economic News and Mixed Earnings

In U.S. economic news on Thursday, the number of Americans filing for unemployment benefits fell to a three-month low the week-ending July 15, in a sign the labor market is stabilizing. Initial claims for state unemployment benefits fell by 1,000 to a seasonally adjusted 253,000, according to the Labor Department. Economists were looking for a rise in claims to 265,000.

The Philadelphia Fed Manufacturing Index, which is an indicator of the economic health of manufacturers in Philadelphia, unexpectedly contracted in the month of July, according to the Federal Reserve Bank of Philadelphia.

The Philly Fed said its current index dropped to a negative 2.9 in July from a +4.7 in June, with a negative reading indicating a contraction in regional manufacturing activity. The results were a surprise because economists were looking for a +5.0 reading.

The Office of Federal Housing Enterprise Oversight reported on Thursday that U.S. HPI rose to a seasonally adjusted 0.2%, from 0.3% in the preceding month whose figure was revised up from 0.2%. Economists had expected U.S. HPI to rise 0.4% last month.

According to the National Association of Realtors, sales of previously owned homes rose 1.1 percent month-on-month in June to an annualized pace of 5.57 million units. This figure was better than economists’ expectations for a 0.9 percent drop to 5.48m units. The report also showed that inventory of homes stood at 2.12m homes, representing a 4.6 months’ supply at the current sales pace.

The Conference Board said on Thursday that its Leading Economic Index for the U.S. declined 0.2% in May to 123.7, following a 0.6% increase in April and a 0.1% increase in March.

U.S. stocks were mostly flat Thursday with upbeat economic data offsetting mixed earnings. The Dow Jones Industrial Average was down slightly, weighed down by Intel and Caterpillar. The S&P 500 Index was also down fractionally, driven lower by weakness in the healthcare and consumer discretionary sectors.

The USD/JPY traded down to a six-week low early Thursday but rebounded after Bank of Japan chief Haruhiko Kuroda said the bank saw no need to stimulate the economy with “helicopter money”. Sellers hit the Japanese Yen after news that Tokyo was considering a 20 trillion package of stimulus to bolster the economy. The currency later recovered 1 percent after the Kuroda’s comment.

The EUR/USD rose to its intraday high after the European Central Bank chief Mario Draghi said only that the bank would take time to reassess any changes in the economic outlook. Traders felt that there was nothing in Draghi’s comments to indicate the ECB is planning on easing further in September to support growth.

August Comex Gold futures were higher, trading above three-week lows, in reaction to the weaker U.S. Dollar and stock indices. September Crude Oil futures were down a little less than 1.0% after traders determined that yesterday’s draw down, reported in the U.S. Energy Information Administration’s weekly inventory report, was not as strong as originally perceived. Traders are concerned that near record crude oil supply and huge gasoline stockpiles are a threat to future refinery demand.

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.