Friday, January 4, 2008

Jobs Data Slams Stocks

As posted here yesterday, only a very positive Labor Department report would keep investors from continuing the selling spree that began on December 27.

The stage was set an hour prior to the market open when the December Non-Farms Payroll report on the employment situation came in far below expectations. Jobs created in the month were pegged at 18,000, and the unemployment rate was ratcheted upwards to 5% from 4.7% in November.

The expectations were for creation of 78,000 jobs, a relatively benign number, but conditions in the US, particularly in construction, manufacturing and retail, worsened during the holiday rush.

Stocks sold off dramatically at the opening bell and stayed submerged throughout the session. All major indices suffered major losses, with the NASDAQ down nearly 4%.

Dow 12,800.18 -256.54; NASDAQ 2,504.65 -98.03; S&P 500 1,411.63 -35.53; NYSE Composite 9,432.03 -223.97

To put today's losses into some kind of perspective, since the December 26 close:

  • The Dow Jones Industrials are down 751 points

  • The NASDAQ is down 220 points

  • The S&P 500 is down 86 points

  • The NYSE Composite is down 462 points

Happy New Year indeed! Looking ahead, profit statements for the 4th quarter and full year are due to begin reporting next week, with Alcoa (AA) set to kick off the festivities on Tuesday, January 8. According to most anecdotal reports, the majority of companies are expected to meet or exceed lowered expectations, with profitability in the range of high-single digits to low teens overall.

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We are on the cusp of a major market meltdown. If we are not already in a recession, we will be soon. The impact from the collapse of the housing segment, the ongoing credit convulsions in the banking and financial area and overall slack consumer spending are hitting the US economy with the force of a category 5 hurricane.

Add to that mess a lame-duck president who continues to veto anything constructive sent by Congress, eight straight years of federal deficits, nearly a trillion dollars wasted on the wars in Iraq and Afghanistan, the stubbornly persistent trade deficit, and you have the makings of a long, deep and painful recession.

Worse yet, if the federal government is allowed to follow the policies in place, we're most likely to face a nation-crushing depression with no conceivable end in sight. Thankfully, we're in a major election year and, if the USA can continue to exist until January 20, 2009, we may make it through without suffering a national disaster.

Make no doubt, the policies of two men - President George W. Bush and former Fed Chairman Alan Greenspan - have placed the United States in one of the more perilous situations of the nation's brief history. Change in leadership will come, but probably not in time to prevent huge losses on Wall Street and a good dealing of economic suffering by the general populace.

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The carnage on Friday was widespread, sparing no particular sector or industry group. Declining issues outpaced advancers by a nearly 5-1 margin, 5127-1301. The gap between the new lows and new highs widened even more, with 1035 new lows to a mere 84 new highs, a disparity not seen since the double bottom collapses in August and November of last year.

In an odd response to the massive selling on Wall Street, the major commodities also lost some ground. Oil closed down $1.27 to $97.91. Gold fell $3.40 to $865.70, while silver dropped 4 cents to $15.46.

With earnings reports beginning next week, investors should be advised that the initial three days of trading for 2008 are likely only a prelude to further declines in a year that will have many twists and turns but almost certainly ends badly.

NYSE Volume 4,139,319,750
NASDAQ Volume 2,516,319,500

1 comment:

magnus said...

Rick, it is all about long term holdings and tax issues. While I could easily cash out and sit on the sidelines this is not a good way of thinking as in many situations you may mistakenly do this only to miss out on huge gains.

I would be interesting in seeing your holdings. :)

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