North America's four major stock market indices shuffled sideways in June. The only month-end to month-end gainer versus May was NASDAQ, at +3.4%. The other three indices stayed flat. Stock markets usually try to get out front of economic activity and profit levels by six months. Indications that much of the negative news was slowing, and in some cases reversing, caused up-ticks in stock prices over the previous several months. However, this momentum has dissipated and uncertainty has set in.

The performance of NASDAQ is something to keep an eye on. It is interesting that employment in computer system design work is one of the few private sector categories to have fallen very little over the course of this recession. On a year-over-year basis, employment in such high-tech work is still slightly positive (+0.4%) versus declines in almost all other categories of jobs. This reflects the desire for productivity improvements and methodology to keep businesses operating even as work forces are being downsized. (story continued below)

Sources: New York Stock Exchange (NYSE), Standard and Poor's (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Table: Reed Construction Data — CanaData.

China Keeps Everyone Guessing

Most of the signs of world recovery have been located outside North America, in Asia. Retail sales in China were said to be up 15% year over year in May. More cars are now being sold in China each month than in the United States. One needs look no further than this for the explanation of the big jump in the international price of oil since February.

A logical consequence will be increasing demand for oil worldwide and long-term. China's dependence on foreign oil is approaching the same high level as in the United States, more than 50%. This situation can only become more strained with time. The Chinese government is taking remedial action whenever and wherever it can. For example, China National Petroleum Co. is the minority partner in the consortium led by BP PLC that just won the bidding to revive one of Iraq's largest oilfields.

However, no-one is quite sure how much of China's current commodity importing is due to production-line needs versus stockpiling against future demand pressures. This uncertainty is putting the surge in energy stocks on hold for a while. The TSE has been driven by energy and precious metals (i.e., gold) producers. Relative to historical peaks, the TSE continues to sit at a higher level than the other three major indices. (story continued below)

Performances of Key Stock Market Indices Over the Last 12 Months-
June 30, 2009

*Each month's closing figure versus the June 30, 2008 closing figure for the index.
The Key Stock Market Indices are:
1) New York Stock Exchange — Dow-Jones Industrials (30);
2) New York Stock Exchange — Standard and Poor's (S & P) (500);
3) National Association of Securities Dealers Automated Quotations — NASDAQ Composite Index;
4) Toronto Stock Exchange — S & P/TSX Composite.

Data sources: New York Stock Exchange (NYSE), Standard and Poor's (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Chart: Reed Construction Data — CanaData.

June's Labor Report Throws a Knuckle Ball at Investors

There are also share-price restraints in some other sub-index sectors. For example, financials were doing better as interest rates stayed down and several of the Top 10 "stressed banks" have been preparing to pay back capital lent to them by Washington. However, the U.S. Bureau of Labor's disappointing June jobs report pitched a knuckle ball at investors.

Yes, employment is a lagging indicator and more job losses were expected due to Chrysler and GM bankruptcy-related dealership closings and plant shutdowns. But the jobs change of -467,000 was more widespread and deeper than had been expected and was up again versus May's -322,000. An economy that had seemed set for a near-term turnaround is now giving signs of waffling and prevaricating about its plans over the summer months and into the fall.

The Financials and Construction Loans

With respect to financial stocks, the weaker jobs market raises questions about consumer borrowing and spending. Retail sector stocks are likely to continue to languish. Plus there is the possibility of more defaults across the whole spectrum of bank lending — prime mortgages, credit cards, lines of credit and commercial and construction loans. An easing of credit conditions remains a fond wish, but hard to achieve under ongoing difficult circumstances.

S & P/TSX Composite
Toronto Stock Exchange

New York Stock Exchange
Dow-Jones Industrials (30)

New York Stock Exchange
Standard and Poors (500)

Nasdaq Composite Index
(National Association of Securities Dealers Automated Quotations)

The charts show month-end closing figures.

Data sources: New York Stock Exchange (NYSE), Standard and Poor's (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Chart: Reed Construction Data — CanaData.