Dow falls 62 on 'complete whiff' of a jobs report
Stocks dive in the morning as unemployment rises to 9.2% and job growth sputters. But late-day buying trims losses. Banks lead the market lower. Oil and copper drop, while gold rises.
By Charley Blaine Jul 8, 2011 12:56PM
Updated at 6:29 p.m. ETWall Street took one look at Friday's jobs report and basically threw up. Then, traders started to look for bargains, perhaps in hope that second-quarter earnings will be cheery.
As a result, stocks regained much of their early losses on the day. Prices for crude oil (-CL) and copper (-HG), two of the most economically sensitive commodities, were lower.
Only six of the 30 stocks in the Dow Jones Industrial Average ($INDU) were higher, led by drugmaker Merck (MRK), up 1.1% to $36.12. Only 34 Nasdaq-100 ($NDX.X) stocks are higher, along with about 59 stocks in the Standard & Poor's 500 Index ($INX), led by Wynn Resorts (WYNN), up 2.3% to $161.15.
The Labor Department's jobs report for June showed U.S. unemployment rising to 9.2% and nonfarm payrolls rising just 18,000 after a gain of only 25,000 in May. The market's reaction, as New York money manager Barry Ritzholtz wrote on his blog, is that "no one is expecting a cavalry charge to save the day."
The Dow closed the day with a loss of 62 points to 12,657. The S&P 500 was down 9 points to 1,344, and the Nasdaq Composite Index ($COMPX) dropped 13 points to 2,860.
Article continues below.The losses were much worse earlier in the session, and there was surprise that the day wasn't a disaster. The Dow was down as many as 152 points at 11 a.m. ET, with the S&P 500 down as many as 19 points and the Nasdaq off 42 points.
The day's decline was broad. Of 44 indexes that Market Dispatches tracks, only five ended the day with gains. The Dow Jones Transportation Average ($DJT) had a record close Thursday of 5,618. Today, the index dropped 70 points, or 1.4% to 5,548, with only American Airlines parent AMR (AMR) and United Continental Holdings (UAL) showing gains, up 2.2% to $5.50 and 1.5% to $22.86, respectively.
Despite the day's drama, it wasn't a bad week for stocks. The Dow was up 0.6% for the week, with the S&P 500 up 0.3% and the Nasdaq up 1.6%. For the year, the Dow is up 9.3%. The S&P 500 is up 6.9%, and the Nasdaq is sporting a 7.8% gain.
| Markets for the week | ||||||||||||
| 7/8/2011 | 7/1/2011 | % chg. | YTD chg. | |||||||||
| Dow Industrials | 12,657.20 | 12,582.77 | 0.59% | 9.33% | ||||||||
| S&P 500 | 1,343.80 | 1,339.67 | 0.31% | 6.85% | ||||||||
| Nasdaq | 2,859.81 | 2,816.03 | 1.55% | 7.80% | ||||||||
| Russell 2000 | 852.60 | 839.98 | 1.50% | 8.80% | ||||||||
| Crude oil | $96.20 | $94.94 | 1.33% | 5.27% | ||||||||
| (per barrel) | ||||||||||||
| U.S. Dollar Index | 75.51 | 74.67 | 1.12% | -$0.05 | ||||||||
| 10-yr. Treasury | 3.02% | 3.20% | -5.66% | -$0.09 | ||||||||
| Gold | $1,541.60 | 1482.6 | 3.98% | $0.08 | ||||||||
The jobs report is a stinker
The market's stumble came after the Dow had risen 150 points over Wednesday and Thursday as hopes grew for a bullish jobs report. A Thursday report from payroll processor ADP suggested Friday's government report would be much better than it was.
Instead, as Mark Luschini, the chief investment strategist at Janney Montgomery Scott, told Bloomberg News, "It wasn't just a miss, it was a complete whiff."
There was little job growth, even in the private sector. Wages aren't rising, and hours worked are flat. The report will force many economists to revise their second-half growth projections. Those, in turn, will affect earnings projects for the third and fourth quarters.
One group of stocks that clearly dragged down by the lousy jobs report: staffing companies. Monster Worldwide (MWW) was off 3.2% to $14.65. Manpower (MAN) fell 4.3% to $56.13, and Robert Half International (RHI) dropped 4% to $26.68.
The market sell-off coincided with continuing worries about the European debt crisis. The euro declined against the dollar. Italian bonds and British and German stocks sold off.
Gold rises and oil tumbles on jobs report
Crude oil in New York was down $2.44 to $96.39 a barrel. Analysts had expected crude might top $100 on a good jobs report.
Energy stocks slumped on the decline, although Exxon Mobil (XOM) finally ended the day up 6 cents to $82.42. Chevron (CVX) was off 0.7% to $105.89. The Energy Select Sector SPDR (XLE) exchange-traded fund was off 0.8% to $76.89 after falling as much as 1.9%. The ETF tracks the energy sector of the S&P 500.
Gold rose $11 to settle at $1,541.60 an ounce, and silver (-SI) rose slightly to $36.543 an ounce. The metals' gains were mostly due to the European problem but also to worries that the budget talks in the United States would fail. Gold was up 4% for the week; silver rose 8.4%.
Copper, however, was off 3.8 cents to $4.40 a pound. The price of copper is a proxy for where investors see global growth headed. Copper finished the week up 2.6%.
Freeport-McMoRan Copper & Gold (FCX) was off 0.7% to $55.12.
| Energy prices -- New York close | ||||||||||||
| Fri. | Thur. | Month chg. | YTD chg. | |||||||||
| Crude oil (-CL) | $96.20 | $98.67 | 0.82% | 5.27% | ||||||||
| (per barrel) | ||||||||||||
| Heating oil (-HO) | $3.0964 | $3.1020 | 5.09% | 21.73% | ||||||||
| (per gallon) | ||||||||||||
| Natural gas (-NG) | $4.2050 | $4.1330 | -3.86% | -4.54% | ||||||||
| (per mil. BTU) | ||||||||||||
| Unleaded gasoline (-RB) | $3.0926 | $3.1270 | 4.16% | 26.06% | ||||||||
| (per gallon) | ||||||||||||
| Brent crude | $118.20 | $118.59 | 5.20% | 24.89% | ||||||||
| (per barrel) | ||||||||||||
| Retail gasoline | $3.5940 | $3.5830 | 1.50% | 16.99% | ||||||||
| (per gallon; AAA) | ||||||||||||
Financials are the market's weak link
Shares of industrial and financial companies were showing the steepest losses, with Bank of America (BAC), General Electric (GE), JPMorgan Chase (JPM) and Boeing (BA) the Dow's biggest laggards.
Financials fell because a weak jobs report epitomizes a weak economy, which probably means loan demand will be soft. Boeing was weaker because it lost a big contract to Airbus.
The Financial Select Sector SPDR (XLF) exchange-traded fund was off 1.5% to $15.43. The ETF, which tracks the financial sector of the S&P 500, is off 3.3% for the year. It is the only ETF that tracks the S&P 500 showing a loss this year.
Google weighs on techs; Wynn shares get an upgrade
Google (GOOG) was the weak link among Nasdaq-100 stocks Friday after a group of Morgan Stanley analysts said the search engine company's growing investments in new products may not pay off.
Google was spending heavily to build and market new products, but it was not clear how and when those efforts would benefit the bottom line. In the meantime, profit margins will shrink, they said.
Shares were off 2.7% to $531.99 and subtracted 3.4 points from the Nasdaq-100 Index. Google is up nearly 5% this month but down 10.6% on the year.
If it seems like the day was just a down-down downer, Steve Wynn might disagree. The boss of Wynn Resorts could justly say his company's stock did its part for the market.
Wynn was the top performer among S&P 500 stocks with a 2.3% gain to $161.15. Wynn was second among Nasdaq-100 stocks.
JPMorgan Chase raised its nine-month price estimate for Wynn Resorts to $174 from $158.
| Short hits from the markets -- New York close | ||||||||||||
| Fri. | Thur. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.030% | 0.020% | 50.00% | -75.00% | ||||||||
| 5-year Treasury note | 1.570% | 1.738% | -10.49% | -22.12% | ||||||||
| 10-year Treasury note | 3.016% | 3.149% | -4.50% | -8.74% | ||||||||
| 30-year Treasury bond | 4.277% | 4.370% | -2.40% | -1.95% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 75.514 | 75.257 | 1.18% | -4.76% | ||||||||
| British pound | 1.6036 | 1.5977 | 0.06% | 2.76% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.624 | £0.626 | -0.06% | -2.68% | ||||||||
| Euro in dollars | $1.42 | $1.44 | -1.61% | 6.50% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.702 | € 0.696 | 1.64% | -6.10% | ||||||||
| U.S. $ in yen | 80.61 | 81.21 | -0.37% | -0.93% | ||||||||
| U.S. $ in Chinese | 6.46 | 6.46 | 0.05% | -2.28% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $1.041 | $1.043 | 0.29% | 3.70% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $0.961 | $0.961 | 1.86% | -3.64% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,541.60 | $1,530.60 | 2.58% | 8.46% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $4.412 | $4.442 | 3.02% | -0.79% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $36.5430 | $36.5360 | 4.91% | 18.12% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $6.5125 | 6.345 | 11.37% | -18.00% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $6.4225 | 6.25 | 2.11% | 3.17% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $1.1658 | 1.162 | -27.04% | -19.49% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $2.6330 | 2.686 | -0.77% | 9.48% | ||||||||
| Crude oil (-CL) | $96.20 | $98.67 | 0.82% | 5.27% | ||||||||
| (per barrel) | ||||||||||||
97Comments
Jul 8, 2011 2:41PM
Jul 8, 2011 3:59PM
Jul 8, 2011 3:46PM
Bush and Cheney get their wish, the complete transfer of all American Wealth into the accounts of the very few at the expense of everyone else and the future of America. We need a complete disbanding of the Federal Reserve, a Congress that has to abide by the same rules and retirements as the the rest of us, and a Supreme Court that won't give unlmited power to corporations. We are no longer a democracy. To be accurate, we are a corporate oligarchy, and the motto should be "In Greed We Trust", because Greed is the only American God.
Jul 8, 2011 2:06PM
I especially like the final sentence....probably means loan demand will be soft. Loan demand is not soft...it is just banks don't want to loan money. They will loan for the mega -corporations which are not needing it because they have no demand for their products due to the economy. The whole problem is that small startups and small business is what is going to pull the economy out of our current "recession" and they can't get loans. As a result we can expect no recovery for the next year or more.
Jul 8, 2011 1:50PM
Jul 8, 2011 2:18PM
Jul 8, 2011 2:03PM
Jul 8, 2011 4:07PM
Jul 8, 2011 2:30PM
Universal health care in Canada and ObamaCare have very little in common. Under ObamaCare if I keep or add employees to my payroll and it takes me above the threshold, as an employer I will incur a 10 to 20 percent additional payroll expense. If I can not pass this cost along to my customer, and that is doubtful, then I will either lay off employees and mechanize, go off shore, or be very reluctant to ever add to my payroll due to the costs of PPACA. Small and medium sized employers simply do not have adequate profit margins to take the kind of payroll cost increase that is mandated by ObamaCare. I am speaking as a small business owner who can see the impact on my company and the rational decisions that I will have to make.
Jul 8, 2011 2:29PM
I'm in the high-tech world. The jobs moving overseas started during the Clinton years. Anyone who was in this business then knows this or are lying. High-tech jobs moving by the millions to India was on the front page story on every computer magazine during these terrible years. This was not the doing of Bush. I cannot even blame this idiot obama for this. It was Clinton plain and simple.
Jul 8, 2011 3:40PM
Poco156 "Do you think Wall Street and Big Business give a f#*k what Obama, congress and the senate have to say or what they propose. They RUN this country! They do what ever the hell they want to do"
Unfortunately, the majority of the employed do not work for Wall Street or Big Business. The vast majority of American jobs are created and sustained by small and medium sized business and this fact is the source of the problem. The Obama economic policies impact is destroying this segment of business and that is the problem. That impact is the " change that you can believe in and fear" and will result in the destruction of the middle class. Destroy the middle class and you have effectively destroyed America.
Jul 8, 2011 4:11PM
notice how after they start to "crash" they always end up gaining back most of their "losses" later on?. This is such a SCAM, and anyone who falls for it, deserves what they get. There is no rhyme or reason as to why this market gains or loses, other than the ones who run it, lining their pockets, by controlling the game.
Jul 8, 2011 5:10PM
Jul 8, 2011 2:21PM
Jul 8, 2011 2:30PM
Obama had a consortium of businessmen tell him months ago exactly what needed to be done for them to start hiring NOW and he elected to ignore them. It just didn't fit into HIS plan so here we are at 9.2% (which, if you factor in those who have given up on finding a job is more likely to be closer to 16%)
But,,,, we did get another good speech today.
I feel better already.
Jul 8, 2011 1:38PM
I would say that ADP needs to get their act together. Where do they come up with their numbers anyway? They have never even been close, never. When they publish their numbers it's HOOORAH time, then the next day with the FEDS it is gloom and doom, then on Monday the market is back up again; crazy..
Jul 8, 2011 3:43PM
Jul 8, 2011 4:43PM
Jul 8, 2011 2:08PM
hmmmmm .....
If you think unemployment is bad now just wait until the full impact of ObamaCare hits small and medium employers as we get closer to 2014. A disaster is coming from which there may never be a recovery.
can you please explain to me why canada, who has universal health care, has a 7.2% unemployment rate as opposed to our current 9.2% rate? just wondering .....
also, ohio just threw out obamacare, thus starting a civil war over healthcare reform .. how will this work out for the unification and recovery of America do you think?
Jul 8, 2011 2:39PM
"This is not a double dip," Council of Economic Advisers Chairman Austan Goolsbee told Reuters Insider after the government report showed the economy created only 18,000 jobs in June. "This is a reflection and reiteration that the growth rate slowed at the beginning of this year."
The only reason Goolsbee is technically correct is that we are not in a double dip recession because we never left the first recession.
The US is still on course for a complete and total meltdown. Retired baby boomers and out of work workers along with state and local governments are raiding their 401k pension plans and taking more out than those still working are putting in.
The stock market went up only because everybody sold their US T-bills and put the money into stocks and are now taking it out to cash out on the bump that influx of money caused.
With no more investors throwing money at US T-bills Bernanke is hard pressed to honor interest payments and $8 trillion dollars of short term T-bills coming due in the next year with few if any of the players rolling their money over.
China is over heating as everyone is pouring their money into China right now. When you take $8 trillion dollars out of the US T-bill market and pour it into China you are going to get some over heating of the Chinese economy.
The $8 trillion dollar question is how long can Bernanke and Geithner hide the fact that no one is buying US T-bills now and most are cashing out before the collapse happens.
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