Stocks fall on unexpected job cuts

US companies shed 39,000 jobs in September. Investors speculate the Fed might take steps to boost the economy. General Electric plans to buy Dresser for $3 billion.

By TheStreet Staff Oct 6, 2010 7:50AM

TheStreetBy Melinda Peer, TheStreet


Updated at 1:25 p.m. ET


Stocks were falling Wednesday after American companies expectedly cut jobs in September, raising concerns about the economy.


At 1:25 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 20 points, or 0.2%, at 10,925. The S&P 500 ($INX) was down by 5.3 points, or 0.5%, at 1,155. The Nasdaq ($COMPX) was losing 30 points, or 1.3%, to 2,370.


U.S. companies shed 39,000 positions in September after adding 10,000 in August, Automatic Data Processing (ADP) said. Economists had expected to see an increase of 18,000, according to The decline followed seven months of job gains. 


"There is simply no momentum in employment," ADP said. The government will release jobs data for September on Friday.


Planned layoffs rose slightly in September, according to a report by global outplacement consultancy Challenger, Gray & Christmas. During the month, employers announced plans to cut 37,151 jobs, representing a 7% increase from planned reductions in August.


"Personal income levels in August were buoyed by the extension of unemployment benefits which had otherwise expired," said Jim Baird, chief investment strategist for Plante Moran Financial Advisors. "Take that away, and inflation-adjusted personal income growth has been virtually non-existent in the past three months."


The prospect of additional funding from the Fed was pressuring the dollar on Wednesday, with the dollar index down by 0.5%. Speculation about quantitative easing gained steam after the Bank of Japan cut its key interest rate almost to zero Tuesday.

U.S. Treasury Secretary Timothy Geithner took aim at China's currency when he warned Wednesday that large economies with undervalued exchange rates risk could create asset bubbles in emerging economies or dismal consumption growth, according to the Wall Street Journal.


The International Monetary Fund said the U.S. economy will grow 2.6% in 2010 and 2.3% in 2011, according to the IMF's World Economic Outlook, which was released on Wednesday. Those forecasts were reduced from July's estimates for growth of 3.3% in 2010 and 2.9% in 2011.


General Electric (GE) was best-performing stock on the Dow, rising 2.7% to $16.96. The company agreed to buy Dresser, a company that makes gear for oil fields, for $3 billion.


Alcoa (AA), which reports third-quarter earnings tomorrow, was also gaining 2% at $12.40. AT&T (T) and Verizon (VZ) were the benchmark's biggest losers, falling more than 2%.


Johnson & Johnson (JNJ) said it will acquire the Dutch biotechnology company Crucell (CRXL) for $2.43 billion. Johnson & Johnson shares were rising 0.1% to $62.84, while Crucell's American depositary receipts were up 0.8% at $34.10.

Shares of Costco Wholesale (COST) were slipping 2.6% to $63 after the company’s quarterly sales fell short of estimates. Sales rose 8% to $23.59 billion but fell short of revenue estimates for $24.23 billion.


3M (MMM) is allowed to move forward on its $943 million purchase of fingerprint-identification company Cogent (COGT) after a judge refused Cogent shareholders' requests for an injunction to prevent the deal in favor of an offer from NEC, according to Bloomberg. 3M's stock was down 0.1% at $88.80, and Cogent's stock was losing 1.4% to $10.58.


Late Tuesday, Allied Irish Bank (AIB) announced its decision to sell its $2.2 billion stake in M&T Bank (MTB) through a public offering, a move that puts an end to any deal speculation, according to an analyst. Allied Irish's stock was declining by 3% to $1.30 and M&T's stock was losing 6% to $78.09.


The Energy Information Administration said crude oil inventories gained 3.1 million barrels in the week ended Oct. 1, compared with estimates of a decline of 1.3 million barrels. Late Tuesday, the American Petroleum Institute reported a 4.44 million-barrel increase in crude oil inventories. Gasoline supplies and distillates stockpiles declined by 2.7 million barrels and 1.1 million barrels, respectively.


The November crude oil contract was shedding 2 cents at $83.62 a barrel.


The December gold contract, the most actively traded godl future, was gaining $5.60 to $1,345.90 an ounce.


The benchmark 10-year Treasury note strengthened by 10/32, diluting the yield to 2.437%.  


The FTSE in London were rising 0.8% and the DAX in Frankfurt was up 0.9%. Hong Kong's Hang Seng gained 1.1%, while Japan's Nikkei jumped 1.8%.


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