Stocks drop on jobs data, Fed forecast

By 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.  

• Find a new broker and start trading online

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.

• Browse the best stocks under $10

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%.

Related Articles

• JPMorgan's 13 favorite stocks for 2011
• Bigger and better IPOs on tap for 2011
• Ford's Mulally discusses the electric Focus