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Stocks Are Down on Weak Monthly Jobs Report

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Stocks on Wall Street declined more than 1 percent on Friday but then started to recover despite a disappointing monthly government jobs report that showed hiring in the United States slowed in May.

The report from the Labor Department showed the economy added just 54,000 jobs in May, compared with the rise in nonfarm payrolls by 232,000 jobs in April. The report also showed that the unemployment rate rose to 9.1 percent in May from 9 percent in April. May’s payrolls number was well below the 165,000 forecast by analysts in a Bloomberg survey.

Investors had been digesting weak signals about the economy in the days leading up to the monthly report, with gloomy reports on jobs, manufacturing and auto sales that helped to send stocks down by more than 2 percent this week to their biggest declines in percentage terms since last August. Also this week, yields on 10-year Treasury notes fell below 3 percent for the first time in 2011 as investors prepared for the economy to slow.

Just after the market opened on Friday, the three main indexes fell more than 1 percent, but over time they started to retrace some ground.

About an hour before noon, the Dow Jones industrial average was down 54.53 points, or 0.45 percent. The Standard & Poor’s 500-stock index was down 5.21 points, or 0.4 percent. The Nasdaq composite index fell 13.19 points, or 0.48 percent.

The benchmark 10-year Treasury yield was down to 2.96 percent from 3.03 percent.

“The body of evidence suggested we were going to get a very weak number this morning, and that’s what we got,” said David Kelly, the chief market strategist for J.P. Morgan Funds.

“It would not be surprising if they reacted badly today,” Mr. Kelly said, referring to the financial markets. “For the last few weeks we have had this drip, drip, drip of bad economic numbers.”

“A lot of individual investors are skittish and they will sell first and ask questions later,” Mr. Kelly added. “But for the long-term investors it is better to ask the questions first.”

Lawrence Creatura, Portfolio Manager at Federated Investors, said investors were more risk averse than they were about a month a go.

“We are in an environment where the volatility of the underlying data is increasing,” Mr. Creatura said. “Today being a Friday, and being confronted with some pretty dark employment data, investors should be ready for anything.”

“Generally people are not going to want to carry too much risk over the weekend, and that may have an impact on pricing as we move through the day,” he added.

Gloomy reports on jobs, manufacturing and auto sales sent stocks down by more than 2 percent on Wednesday in their biggest declines since last August. Yields on 10-year Treasury notes fell below 3 percent for the first time this year as investors looked for the economy to slow.

After closing down 41.59 points, or 0.34 percent, on Thursday, the Dow was on track for its fifth consecutive weekly loss. The last time the index had closed lower for five consecutive weeks was the five-week period ending on July 23, 2004.

“We are entering a time of year where investors often get skittish, and it makes sense for everyone involved in the markets to buckle their seatbelts because the data indicates we may be in for a bumpy ride,” Mr. Creatura said.

But some economists expect the economy to pick up in the latter part of the year.

Mr. Kelly said he estimated economic growth to pick up, averaging above 3 percent in quarterly growth rates in the second half of the year compared with the 2 percent he forecast for the second quarter. He said a situation for a pick-up in growth was more likely than the country sinking into another recession because of factors including a weak dollar, easy monetary conditions and pent-up demand. Corporate profits are also poised to grow.

“For long-term investors that is still the way I would play this,” he added. “But in the short run this is going to raise a lot of fears about something worse.”

“Because of that, stocks are better value than bonds,” Mr. Kelly said.

Steven Ricchiuto, the chief economist for Mizuho Securities USA, said in a research note that the jobs report was weak enough to mean that the 10-year note would trade down toward 2.75 percent.

West Texas Intermediate crude prices for July fell below $100 before the market opened, to $98.60, down by $1.80.  An hour into the trading day, the price reflected a 42-cent decline to $99.98.

5 Responses

  1. At this juncture, the only possible course of action to take is to declare a national moratorium on foreclosures, confiscate all the assets of the fraudulent banks and of all their officers past and present (I doubt that too many insurance carriers faced with D&O claims would defend and indemnify them in the light of what keeps transpiring… If I remember, fraud is always excluded from coverage), dismantle said banks once and for all, offer appropriate incentives and financing to small local banks and credit unions to rewrite and take over existing mortgages on principal residences only (investors who tried to get rich in the bubble have little sympathy from me and speculation entails inherent risks), rehab all vacant properties seized in foreclosure and abandonned by the banks, return them to foreclosed homeowners on a lease-to-buy basis at reasonable and affordable prices, and reestablish what made America so strong: a healthy, solid middle class, resourceful, creative, inventive and hardworking. By simply rehabing all the vacant properties, employment would be guaranteed for quite un number of people currently unemployed through no fault of theirs.

    When over 1 million people are homeless in a country as rich as the US, among whom more than 25% are children, radical measures must be taken.
    The way things currently are, we are brought closer and closer every day to a civil war, which will happen unless drastic solutions are rapidly implemented.

    Incidentally, I stopped paying my mortgage in November. Not because i am a deadbeat but because, as I was researching my mortgage, i realized the extent of the fraud visited upon me by way of numerous fees Chase refused to ever explain, acknowledge, clarify and/or justify. After 3 years of endless correspondence, complaints with federal agencies, complaints with BBB, etc. I finally smartened up and retained an attorney. My case is pending in federal court. Were my solution to be implemented, i would be more than willing to see my mortgage renegotiated with a solid bank and in accordance with the law. Until then, Chase will not have a penny more from me. And since Chase made it a point to shoot my credit record, it will take some serious governmental action before I do anything more.

  2. those responsible and it goes way way bsck don’t give s fig about the economy or the fallout or the suffering since the ones doing the suffering are never the ones who caused it and apparently no heads are gonna roll.., to date anyway..,.and it’s a day late and s dollar short

  3. The stock market is fake. IMHO the only ones trading are the richest 1% playing games with each other and the rest of us get to watch as they manipulate and try to out fox each other. They have so much monopoly money they just play the game every day trying to see how many hotels they can build on Boardwalk.

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