Disappointing Stock Market Results for June

The stock market finished the end of June at the lowest point seen in the previous nine months. The downward trend is attributed to investors becoming more nervous about the state of the global economy and the failure of the job market to show any lasting improvement.

Job Losses

The job report is expected to show a drop of about 125,000 jobs in the non-farming sectors, while jobless claims have climbed to a high of 4.62 million. While some of the drop is due to the release of the temporary census workers that were hired in the past months, it can also be blamed on the failure of the private sector to aggressively hire. The only good to come from this report is expected to be that job losses are continuing to slow even if new jobs are not being created. Many companies are afraid of what some of the new government regulations may bring in 2011 and are reluctant to increase their payrolls. They are anticipating potential higher costs of health care and additional taxes.

Consumer Confidence

The Consumer Confidence Index may not be near the historic 26.9 low shown in March, 2009, but the drop from 62.7 in May to 52.9 in June shows that the slow economic growth is troubling to most Americans. The forecasted economic growth rate has been downgraded several times and currently rests at 2.7%. While this number is low, any positive percentage reported shows that some improvement in the economy is expected. It does appear that businesses are slightly more confident in the future. Durable goods orders placed by manufacturers have been up for five months in a row when compared to the same month in the prior year. While the Gulf oil disaster has been financially devastating for the Gulf region and will definitely have some impact on the economy, the experts are saying that it is not enough to trigger another recession.

Global Economy

While the recent troubles in the European and Asian markets have been affecting the stocks traded on the New York Stock Exchange in recent months, the rebound in the Euro did not seem to have too much affect in June. The Euro gained 2.3% against the dollar which helped bring it back above its 50-day moving average; the Euro has not appeared this strong since last April. The remainder of the European market continued to perform poorly with markets in France, Germany, and Britain closing at losses between 1.8% and 3.0%. The Asian markets showed similar results. The Shanghai Composite reported a new 52-week low with a 1% loss, while Japan’s Nikkei showed a 9-month low with a 2% drop.

All Three Popular Averages Are Showing Downward Trends

The Dow Jones Industrial Average began the month at 9,931.97 and edged up well over 10,000 before finishing at 9,732.43 for a slight gain. At the close of June, the S&P was reported at 1027.37 points. The S&P has shown a steadily declining 50-day moving average that threatens to bring it below its 200-day moving average. It’s not encouraging to investors that the experts call this phenomenon a Death Cross. The NASDAQ finished at 2101.36, down 7.88 points from the previous day.

Market Sectors

Improving market sectors include Consumer Discretionary, Telecom, and Consumer Staples, while Financials, Health Care, Materials, Industrials, Energy, Tech, and Utilities are showing a declining trend. Health Care stocks were particularly low due to the SEC investigations of two major players, Almost Family (AFAM) and Amedisys (AMED), in this category.

Dividend Yields Continue With Business As Usual

While stock prices may be falling, most companies continue to make their normal dividend payments. As many businesses are anxious to make sure that their stock prices do not fall below a comfortable point, they will do everything possible to retain their dividend schedule and maintain the confidence of their investors. Dividend yields remain high, but some analysts are becoming concerned that the payout amounts will not be maintainable.

No Dividends for BP Shareholders

The BP Gulf oil spill is one area that has definitely affected dividend investors who depended on this traditionally high-yield dividend stock to diversify their portfolio. While BP was able to pay their usual $10 billion in dividend payments for the first quarter, they have suspended future payments due to public pressure to divert those funds to clean-up efforts and restitution.

Dividend Yields by Sector

While some US firms canceled dividend payments in 2009 due to the recession, you can still find dividend paying stocks in all major industrial sectors. Pay particular attention if you’re interested in adding financial stocks to your portfolio. The Financial sector has historically paid out as much as 20% of the total dividend payments reported in the S&P, but that number has shrunk to less than 10%. The trend in the yield further illustrates the lower payments as it has dropped from an average of 4.44% in 2008 to 1.22% in 2009. The Financial sector’s yield stands at 1.14% so far in 2010.

The following list shows a few of the recent yields by industry, as well as the stock that is considered to be the safest investment option by many experts:

• The Consumer Staples sector makes up 17.57% of the S&P 500 dividend total with a 3.25% average yield. Proctor and Gamble is considered a safe stock with a yield of 3.2%
• The Consumer Discretionary sector contributes 7.74% to the total with a 1.53% average yield. Wal-Mart continues to be a safe bet with a 2.5% yield.
• The Information Technology sector can claim 9.08% of the total payout with a 1.02% average yield. It’s no surprise that Microsoft is considered the safest option with a 2.1% yield.
• The Health Care sector adds 13.29% to the total with a 2.37% yield. While Pfizer’s dividends are fluctuating, it is still considered the safest choice in this troubled industry.
• The Financial sector contributes 8.82% to the S&P’s dividends with a low 1.14% average yield. Visa is considered a safe stock with a .50 payout that is expected to climb.
• The Telecom sector makes up 8.58% of the total with a 6.29% average yield. Verizon and AT&T have been close competitors in the safest stock race with a 6.7% and 6.8% yield respectively.
• The Utility sector adds 8.04% to the dividend total with an average yield of 4.75%. The American Electric Power Company is considered a safe choice with a 5.1% yield.