U.S. equities move lower, July 2-6

U.S. markets were in positive territory before closing mid-week for the July 4 Independence Day holiday, but moved into negative territory again after disappointing jobs data demonstrated that nonfarm payrolls added just 80,000 jobs in June—the third month in a row that employment grew by less than 100,000 jobs. The Dow Jones Industrial index ended the July 2-6 trading week down 0.84% or 107.62 points at 12,772.47 and the S&P 500 index lost 0.55% or 7.48 points to finish at 1,354.68. The Philadelphia Gold and Silver index edged 0.13 of a point lower or 0.08% to 157.41.

Shares of Patriot Coal closed the week 97¢ or 79.5% higher at US$2.19 per share—just days before the company announced that it was filing for Chapter 11 bankruptcy protection as it struggles with lower demand and prices for coal along with rising costs. Milder winters, cheaper natural gas prices and stricter emissions controls have also taken a toll on the coal sector. Statistics from the Energy Information Administration demonstrate that demand for U.S. coal in the first quarter of 2012 was the lowest for that period since 1988. In a press release on July 9, Patriot said bankruptcy protection would “give it time to address its financial challenges” and position the company “for long-term viability and success.” Patriot has obtained a commitment for US$802 million of debtor-in-possession financing from a number of banks to support its reorganization process. The performance of other coal companies was quite mixed, however, with shares of Alliance Resource Partners up US$3.98 to US$60.10 per share, and Peabody Energy and Arch Coal also in positive territory with gains of 34¢ to US$24.86 and 26¢ to US$7.15, respectively. By contrast, Walter Energy fell a hefty US$3.04 to US$41.12 and Alpha Natural Resources was down 4¢ to US$8.67.  

Lack of clarity in Argentina continued to hammer shares of mining companies there with Pan American Silver down US$1.08 to US$15.80 per share after the government of Chubut proposed higher taxes and royalties in a new draft mining law that the Vancouver-based mining company said would make its Navidad project uneconomic. In other news from South America’s third-largest economy, Argentina’s central bank declared on July 5 that people would no longer be able to buy US dollars for the purpose of saving them, in an effort to safeguard foreign reserves. On July 4 President Cristina Fernandez also announced that private banks would have to lend cheaply (rates below inflation) to businesses to help support the country’s economy.