U.S. Indexes Drop 1.4% on Weak Jobs Growth

Bikram Pandey
09 Jul, 2011
New York City

U.S. indexes turned lower after unemployment rate increased to 9.2% and payrolls increased only 18,000 in June. The second weak monthly jobs data cast a long shadow on market sentiment and investors scaled back economic expansion outlook. Crude oil decreased and gold gained.

[R]7:05 PM New York – U.S. indexes turned lower after unemployment rate increased to 9.2% and payrolls increased only 18,000 in June. The second weak monthly jobs data cast a long shadow on market sentiment and investors scaled back economic expansion outlook. Industrials, financials and technology stocks led the decliners. Gold edged higher and crude oil decreased.[/R]

U.S. indexes dropped after non-farm payrolls increased a meagre 18,000 and unemployment rate climbed to 9.2% in June. The weak jobs growth added to market jitters after private sector scaled down its employment growth and governments at all levels continued slashing payrolls. May revised payrolls increase was cut in half to 57,000.

Federal government cut 14,000 jobs and state and local governments trimmed 25,000 more from the payrolls. Private sector also lowered its jobs additions to 57,000 from the previous months of 200,000 gains.

The jobs increase was significantly lower than expected growth of 150,000 and that dragged the S&P 500 index and the Nasdaq by 1.4% at its worst in the day.

Stocks turned lower a day after gaining more than 1% on the private sector survey and a decline in weekly jobless claims. But all the gains were lost in trading today. For the week the Dow and S&P indexes added 1.7% and the Nasdaq gained 3%.

Technology, industrials and financials led the market decliners. General Electric, Caterpillar and Bank of America fell more than 2%. Staffing companies were among the leading decliners. Robert Half, Manpower Group and Monster Worldwide dropped 4%.

The indexes gained nearly 1% on Thursday after retailers reported best same store sales in seven years and unemployment claims were below the estimate and private sector added jobs at a faster pace. However, the all important monthly payroll report on Friday knocked the wind of the rally that was building up in the week.

Ameron International second quarter net income plunged. National Oilwell agreed to acquire Ameron in cash for $772 million. PriceSmart third quarter net income rose. FTI Consulting estimated second quarter revenues in the range of $395 million to $401 million. Newport agreed to buy Ophir Optronics for $230 million.

The European indexes traded sideways and German exports gained 4.3% in May. NYSE Euronext shareholders approved merger with Deutsche Boerse. ING agreed to sell its car lease unit to BMW for $1 billion.

German exports rebounded but manufacturing turnover fell in May. French May budget deficit widened and business sentiment fell in June and Swiss jobless rate remained flat in June. Hungary trade surplus surged in May.

The UK indexes gained after producer prices rose 5.7% in June, driven by higher petroleum and food prices. News Corp may face delay in the acquisition of British Sky Broadcasting after an outrage on its long practised journalism ethics at the largest selling tabloid.

The benchmark index Nikkei in Tokyo closed at a 4-month high after the yen weakened and retailers lifted operating earnings outlook. Utilities rebounded a day after falling sharply on the stress test worries.

Australian stocks closed higher and the benchmark index gained 1.1%. The index added 1.4% for the week. Miners and financials led the gainers in trading. Four Jetstar aircrafts missed regular schedule and were grounded overnight for checking.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 3.02% and 30-year U.S. bond traded fell to 4.37%.

The U.S. dollar increased at $1.424 to one euro and fell against the Japanese yen to 80.60 yen.

Immediate delivery futures of Texas crude oil increased $2.46 to $96.21 a barrel and futures of natural gas increased 0.06 cents to $4.19 per mbtu and gasoline price decreased 4.13 cents to 308.60 cents a gallon.

In metals trading, copper decreased 3.45 cents to $4.40 per pound, gold soared $10.70 to $1,541.30 per ounce and silver decreased $0.8 to $36.45.