MARKET WRAP – STOCKS START JUNE ON A BAD NOTE

Stocks opened 1% lower this morning before rallying back into positive territory on the better than expected ISM report.  Stocks faded into the close and finished with substantial losses of 1.7%.  Volume was heavy on the downside as 75% of all volume was negative.  Breadth was also negative at 3:1.  Overall, volume was moderate.   Investors are increasingly concerned that the slowdown in China and Europe will ultimately spread to the United States.

From Daily Futures:

U.S. Economy
The Institute of Supply Management’s index of manufacturing fell from 60.4 to 59.7 in May, better than expected and a sign of expansion. The June 2011 eurodollars ended down .025 at 98.68.

The U.S. Census Bureau said that construction spending was at an annual rate of $869.1 billion in April, up 2.7% on the month, but down 10.5% from a year ago.

Grains and Cotton
The USDA said that last week’s export inspections of:
Corn totaled 47.4 million bushels, up 43% from a year ago.
Soybeans totaled 5.7 million bushels, down 39% from a year ago.
Wheat totaled 12.1 million bushels, up 17% from a year ago.
July soybeans closed down 5.75 cents at $9.32.

Lumber
Statistics Canada said that sawmill production totaled 4.627 million cubic meters in March, up 27.8% from a year ago. July lumber ended up $3.40 at $228.90.

Orange juice
July orange juice fell 3.95 cents to $1.3895 in spite of recent talk about too much rain in Brazil and a forecast for an active hurricane season in the Atlantic Basin.

Coffee
July coffee finished up 2.30 cents at $1.3655, helped by a report of increased coffee exports from India (see article). Also, Tropical Storm Agatha hit Guatemala on Saturday, causing flooding and over 150 deaths.

Metals
An index of manufacturing in China fell from 55.7 to 53.9 in May, still a sign of expansion. July copper closed down 4.15 cents at $3.0630.

Energies
Tensions in the Middle East are rising again after a botched effort to stop a Turkish ship from reaching Gaza resulted in the deaths of 10 activists on board (see article). July crude oil closed down $1.39 at $72.58.

Currencies
The June euro closed down .0066 at $1.2258 after the European Central Bank bought more euro zone bonds and warned that European banks may lose more money in the next year and a half (see article).

Eurostat said that the unemployment rate for the EU-27 was unchanged at 9.7% in April. Also, an index of manufacturing in the Euro zone fell from 57.6 to 55.8 in May, still a sign of expansion.

The Bank of Canada became the first G7 nation to increase its interest rate today, going from .25% to .50%. Statistics Canada said on Monday that real GDP was up 1.5% in the first quarter and up 2.2% from a year ago, better than expected. The June Canadian dollar ended up .08 at 95.21.

An index of manufacturing in the U.K. stayed at 58.0 in May, its highest in 15 years. The June British pound jumped up 1.75 cents to $1.4663.

The Reserve Bank of Australia met and kept its interest rate at 4.50%, as expected.

Also on Monday, real GDP in India was up 7.4% in the first quarter from a year ago.