Stocks drop on jobs data, Fed forecast

The markets turn lower as unemployment -- at its lowest level since May 2009 -- misses expectations. The Fed chief sees more slow job growth ahead. Gold slides as the dollar gains.

By TheStreet Staff Jan 7, 2011 8:33AM

TheStreetWall Street © Comstock Images/agefotostockBy Melinda Peer, TheStreet

 

Updated at 11:23 a.m. ET

 

Stocks were declining slightly as U.S. employers added fewer jobs than expected in December, though the unemployment rate fell to its lowest level since May 2009.

 

As of 11:23 a.m. ET the  Dow Jones Industrial Average ($INDU) was down 28.3 points, or 0.2%, at 11,669. The S&P 500 ($INX) was down 5 points, or 0.4%, at 1,269 and the Nasdaq ($COMPX) was falling 8.1 points, or 0.3%, to 2,701. 

 

The Labor Department said the U.S. economy added 103,000 jobs in December, falling short of the 150,000 economists had expected, according to Briefing.com. The unemployment rate fell to a better-than-expected rate of 9.4% from 9.8% in November, outpacing estimates of 9.7%. Company payrolls increased by 113,000, falling short of Wall Street's estimates of 162,000. In November, private payrolls increased by 79,000.  

Hourly earnings for December inched up by an expected 0.1% after coming in flat in November. The average workweek held steady at 34.3 hours.

 

"Overall, the report fell short of expectations," said Patrick O'Keefe of J.H. Cohn and a former deputy assistant secretary at the Department of Labor. "But, when looked at from a two-to-three month perspective as opposed to a one-month reoprt, it is generally positive."

 

The capital goods sector was seeing strength, with Caterpillar (CAT), 3M (MMM) and Boeing (BA) leading the Dow higher. Tech and telecom stocks were weak with Verizon (VZ), AT&T (T) and Intel (INTL) heading lower.

 

Federal Reserve Chairman Ben Bernanke said in testimony before the Budget Committe today that economic recovery will likely pick up in 2011, but there will be slow progress in the jobs market.

 

"The projections submitted by the Federal Open Market Committee participants in November showed that, notwithstanding forecasts of increased growth in 2011 and 2012, most participants expected the unemployment rate to be close to 8% two years from now," said Bernanke. "At this rate of improvement, it could take four to five years for the job market to normalize fully."

 

At 3 p.m., the Federal Reserve will release its consumer credit report for November. Economists anticipate consumer credit will contract by $2.5 billion after expanding $3.4 billion in October.

 

In company news, shares of AK Steel Holding (AKS) were down 6.8% at $15.47 after Goldman Sachs downgraded its rating to sell from neutral citing weakness in the electrical steel market.

 

Baker Hughes (BHI) saw its stock increase 4.6% to $57.35 as Goldman upgraded the stock to buy from neutral. Goldman expects an improvement in international margins.

 

Shares of American International Group (AIG) were up 0.9% to $60.94 after The Wall Street Journal said the company agreed to pay $450 million to resolve legal disputes with competitors. AIG's board declared a dividend of about 75 million warrants to buy shares of AIG common stock at $45 a share.

 

Borders Group (BGP) shares were climbing 5.7% to 91 cents in early trading after The Wall Street Journal said Thursday that the book chain is in talks with lenders and advisers about restructuring its debt. The company might also reach a new debt agreement with lender GE Capital.

 

Liz Claiborne's (LIZ) stock was slumping 14.8% to $5.88. The clothing company lowered its profit outlook late Thursday amid weak December sales for key brands.

 

Crude oil for February delivery was trading 70 cents higher at $89.08 a barrel. The February gold contract was up by $4.70 at $1,376.40 an ounce.

The dollar was strengthening against a basket of six currencies, with the dollar index up by 0.2%. The benchmark 10-year Treasury note was down by 8/32, lifting the yield to 3.435%.

 

Hong Kong's Hang Seng shed 0.4%, and Japan's Nikkei added 0.1%. London's FTSE was losing 0.3%, while the DAX in Frankfurt was ahead by 0.07%.

 

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145Comments
Jan 7, 2011 10:13AM
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2 sick,  Your buddy Dubya kept the cost of two wars "Off Budget".  That means the cost was not added to the debt.

So I guess you are saying the debt accumulated during the first 2 years of Pelosi's reign, er, "leadership", was actually higher.  Thanks for pointing that out.

By the way, does anyone know if spending on the war has been included "on budget" the last couple of years?
Jan 7, 2011 11:05AM
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We whould hate for him to lose count again of how many states there are...  Maybe he should count the stars on the flag...  but everytime he gets to 57 he forgets what a star is...

Mirage,

 

I would call that a slip, much like Sarah Palin saying North Korea was our ally....

 

a true moron would make a banner of it and claim something like "mission accomplished".

 

Sound familiar?

 

 

 

Jan 7, 2011 10:28AM
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everythecynic    It was Mark Twain.  Numbers out of context can lose their meaning.  Unfunded wars that were unnecessary vs. deficiets to prevent total economic collaspe - spending can be necessary wether you have the money or not.  The government doesn't have as much money when 9 - 10 million people quit sending in their taxes for lack of income.  I'm amazed, at least on this blog, the Dems get little respect for saving the country.
Jan 7, 2011 10:18AM
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Brutus, The cost of those wars wasn't added to the debt until President Obama was elected and decided to be honest with the American people.  You knew that.
Jan 7, 2011 4:07PM
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What next a bail out to those that bought at the 14,000 level on the Dow? 

 

Look markets go up and down.  We should not subsidize the losers.  If you make a bad investment and it goes down, man up an learn from your loss...

Quite being a democrat and want a government bailout...

 

 

Jan 7, 2011 4:05PM
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At your expense?

 

Since when is working hard and being profitable at your expense?  Deklen, do you socialist democrats ever want to do a days work for a days pay, of do you just want another government handout...  18 months?   I think I know the answer to the question... You just want the Welfare check...

Jan 7, 2011 1:04PM
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"Taxes were cut in 2003 and these are commonly referred to as the  Bush tax cuts.  Between 2003 and 2008, we had 58 straight months of job creation, a modern record.

Coorelation != Causation.  After all, its also worth noting four other economic facts:

 

1: GDP growth was lackluster over that entire period (2004 was the only year of GDP > 3%)

2: While growing, the growth was VERY modest every year except 2006

3: The debt doubled

4: Those same tax cuts were in place when those jobs were lost in 2007-today.

 

I argue that the reason for the job increases was because worker wages FELL every year of his term, which was itself (under Kenysian theory) one of the reasons for this recession in the first place!

Jan 7, 2011 10:35AM
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Hmmm...

 

Do these number smake sense?  103,000 jobs created and unemployment fall 4 tenths of a percent?

 

So if we created 1,030,000 jobs unemployment would be down to 5.4%?  And if we created 2,523,500 we would have ZERO unemploment?   Tell that to the 12+ millon unemployed...these numbers do not make any sense...

 

Considering how many of these jobs were temporary Xmas hiring, I would have to say the number is fairly disappointing...  Given that Fedex alone laid off 50,000 seasonal workers in the last few weeks...

 

Jan 7, 2011 10:34AM
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Deklen -

BHO - "I plan on visiting all 57 states"

BHO - "I will run a transparent government"

BHO - "I will close Gitmo by Jan 31, 2010"

Gore - "Who are those people?" (in the Jefferson memorial looking at overhead busts)

Jan 7, 2011 10:21AM
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sunny, enjoy the Boehnhead years, haha
Thank you Deklen, we plan on it. I hope you enjoy them as well. Wink
Jan 7, 2011 9:58AM
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2 sick, interesting article, I suspect that for the next few hours, you will get plenty of responses about how increased debt and deficit spending is actually a good thing, or at least the lesser of two evils, and somehow this will all still be blamed on the previous administration.
Jan 7, 2011 9:47AM
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2 sick...thanks for that data....it just goes to show that the folks out of California think that high deficits are OK....look at the shape they are in and who they elected in midterms in CA at the state level....and Pelosi keeps getting re-elected in her district....I just hope she is not back as speaker again in my lifetime.
Jan 7, 2011 11:01AM
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Real men live in Ohio well with one exception - John Boner! Boo hoo hoo!
Jan 7, 2011 11:01AM
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Mr Fat Cat - All the Gay People in Texas migrated from California because they can't afford the cost of living in San Francisco anymore and all their friends are departed.  Luckily, more gays migrated to NYC to work on Broadway and the fashion industry.
Jan 7, 2011 10:47AM
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We need to be slower with Comrade Obama...

 

We whould hate for him to lose count again of how many states there are...  Maybe he should count the stars on the flag...  but everytime he gets to 57 he forgets what a star is...

 

Can you say MORON?

Jan 7, 2011 10:44AM
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Oh, Deklen, I am already enjoying Texas...

 

Its way better than any Chicago Winter...

It is no where near as corrupt, hell these people have not asked for one kick back or bribe of any kind yet...

The people seem more friendly...

The business environment is SUPERIOR...

The work force seems smarter and better educated!!!

(Maybe the Chicago Public schools are to blame)...

Crime is less...

There are way less Democrats/Leeches down here...

 

I should have done this decades ago...

 

Jan 7, 2011 10:42AM
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religious fundamentalist country
Deklen, do you even know what that means?
Jan 7, 2011 10:39AM
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It will be interesting to see who votes for what when this healthcare law repeal bill comes up for a vote.  I wonder how many Dems will switch sides and vote for the repeal, seemingly following in the footsteps of John Kerry, they will be able to proclaim "I voted for it before I voted against it".
Jan 7, 2011 10:09AM
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2 sick,  Your buddy Dubya kept the cost of two wars "Off Budget".  That means the cost was not added to the debt. There was also a little financial meltdown, 700 billion TARP and a much needed stimulus.  How much did the Bush tax cuts add to the debt?  They call it "Selective amnesia".  I thought only women had it.
Jan 7, 2011 9:43AM
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2 sickto type,

 

I at first doubted your numbers, but they check out.   I had thought the total debt stood at about 13.6 Trillion.   Your 14 Trillion + number is correct.

 

4 years of Donkey special interest paybacks has probably destroyed the next generations financial future.    In 2012 we need to fire another 2000 Donkeys, and especially the moron in the WH now.

 

Maybe we can put our fiscal house in order.  First step, DO NOT FUND any parts of Obamacare.  Then slash government spending to pre-Pelosi levels.  Then start making real cuts in spending and reduce the size of bloated government.

 

A 3-4 month shutdown would be good for America, before we turn into a socialist state...

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