Nothing More Than A Setback....?!

Stocks opened slightly lower and never managed to rally into positive territory. Throughout the day stocks stayed in the negative and made a series of lower lows before finally finding what turned out to be their lows for day around 3.00 pm ET. The final hours saw some short covering and late day buying which managed to pare some of the earlier losses.

At the end of the session the Dow was down 65 points or 0.75 %. The S&P settled at a loss of 12.98 points or - 1.37 %.

After a four day rally today was the day of "nay sayers" and doubters. Also...for the first time in a while it seemed some of the economic numbers actually managed to seed some doubt with investment professionals.

US mortgage applications fell last week at a rate of - 16.2 % versus the prior week. A lower reading had been widely expected (mostly due to the increase in longer term interest rates) but the size of the decline was larger than expected.

The Institute for Supply Management released their non manufactoring index, a report which is supposed to show hiring activity in the service sector.

The index edged up to 44.0 for May...the strongest reading since October 2008. Unfortunately though even a reading of 44.0 still evidences that activity and, by extension, the number of jobs in the service orientated part of the economy are still shrinking.

To be sure...it is nice to see that the index is going up...however...a relative improved reading is meaningless when it never goes into positive. Simply put...it doesn't matter if it rains 2 or 3 inches an hour...it still rains and over time the basement still will get flooded.

The final piece to the puzzle for the day was the ADP payroll estimate for May. ADP is estimating that Friday's official unemployment report will show total job losses of about 532 thsd.

A 532 k number would be better than what we have been seeing in April and March but it still is a horrible number.

The market is hoping for total job losses below 500 k but if ADP has it right we will be over 500 thousand for May job losses.

The market is clearly gearing up for the employment report on Friday. So tomorrow might be range bound and less volatile than the past couple of days.

I remain optimistic stocks and expect the market to head higher from here on out. A bad unemployment report on Friday would almost certainly derail the current advance...but once again....time will tell.

I won't be around to write the report for Thursday...so I will see you on Friday to wrap up the week.

See you then.

Steve