MARKET WRAP – STOCKS GET SLAUGHTERED

Stocks got hammered today after more disturbing signs from abroad.  Today’s worries were sparked when China’s leading indicators came in well below expectations.  This sent the Shanghai composite down over 4%.  China has proven to be the one truly strong leg in the global recovery so investors are particularly nervous about a slowdown.

The S&P finished the session deep in the red with a -3% losses.  Market internals were terrible with over 98% of volume at the NYSE to the downside and breadth at 10:1 in favor of the bears.  Credit markets were a bit more sanguine on the day.  Markit’s Gavin Nolan elaborates:

“But despite the volatility in the broader credit markets, the widening in banks spreads was relatively tame by recent standards. The Markit iTraxx Senior Financials index was 8bp wider at 171bp, a significant move but mot that dramatic. The difference between the index and the main corporate index was around 39bp, considerably lower than the 63bp
reached earlier this month.

Sovereigns were even more subdued. The Markit SovX Western Europe was trading at 166bp,  8bp wider, and most of its constituents were wider but not by enormous amounts. Spain was trading around 277bp earlier in the session, wider than its previous record of 273bp. But like its fellow peripherals it was fairly solid during the afternoon’s turmoil.”

From Daily Futures:

U.S. Economy
The stock market is lower with ongoing worries about Europe’s debt problems, the new popularity of budget-cutting, and the possibility that China’s economy may be slowing. Most commodities also closed lower.

The Conference Board said that its U.S. index of consumer confidence fell from 62.7 to 52.9 in May, weaker than expected. The September U.S. T-bonds gained 27/32nds to a new contract high of 127.04/32nds.

The Standard and Poor’s/Case-Shiller index of home prices in twenty U.S. cities was up .4% in April and up 3.8% from a year ago, more than expected, with help from expiring tax credits.

Grains and Cotton
Today was the last day of trading before tomorrow morning’s USDA acreage estimates. Will there be any surprises? December corn closed down 8.75 cents at a new contract low of $3.44.

According to Agrimoney.com, Oil World is expecting soybean oil prices to rise soon, helped by increased imports from China and India (see article). December soybean oil finished down .99 at 36.81, the lowest close in over eight months.

December cotton ended down .32 at 78.13, surprisingly strong given the broad weakness in most other commodities.

Livestock
Friday’s inventory report showed that producers are keeping the number of hogs down, but August hogs closed down 1.22 at 80.95 anyway, overwhelmed by worries about the world’s economy.

Cocoa
Cocoa has been of the few commodities that tried to trade higher lately, but September cocoa dropped $159 to $2,979, beat down by larger economic worries.

Energies
Tropical Storm Alex is expected to hit northern Mexico or southern Texas on Wednesday night as a category two hurricane. It is not expected to have a significant impact on crude oil production in the Gulf. August crude oil closed down $2.31 at $75.94, more worried about the world’s economic problems.

Yesterday’s 6 to 10 day forecast from the National Weather Service is expecting above average temperatures in the northeastern U.S. and above average precipitation in the central U.S. August natural gas ended down 18.5 cents at $4.548.

Metals
August gold was up $3.80 at $1,242.40, helped by increased expectations that slow world growth will keep interest rates low.

Currencies
Japan’s unemployment rate increased from 5.1% to 5.2% in May, higher than expected. The government also said that industrial output was down .1% in May, slightly weaker than expected. Household spending was down .7% in May from a year ago, weaker than expected. The September yen closed higher.

The Conference Board’s index of leading indicators for China was down .3% in April, the smallest increase in five months and a sign that the economy might be slowing. The September Australian dollar fell 2.17 cents to 84.35. September copper fell 15.90 cents to $2.9305.