U.S. Wages Struggle as Jobless Rate Drops to 5.6%, S&P 500 Falls 1%

Nichole Harper
09 Jan, 2015
New York City

Market indexes in New York declined as much as 1.1% after December month jobs increase was better-than-expected and jobless rate dropped to 5.6%. However, wages declined 0.2%. In 2014, employers at all levels added monthly 246,000 net new jobs after adding 196,000 a month in 2013.

[R]12:30 PM New York – Market indexes in New York declined as much as 1.1% after December month jobs increase was better-than-expected and jobless rate dropped to 5.6%. However, wages declined 0.2%. In 2014, employers at all levels added monthly 246,000 net new jobs after adding 196,000 a month in 2013.[/R]

U.S. market indexes descended sharply and after ninety minutes of trading dropped as much as 1.2%. In the last one hour of trading indexes trimmed losses by half in volatile trading.

Stocks were under pressure after a two-day rally and December month jobs report showed an increase in hiring but wages remained under pressure.

On Wall Street trading, Tollbooth Strategy Index dropped 1.3% or 129.05 to 9,892.60.

S&P 500 index fell 20.31 or 1% to 2,042.40 and the Nasdaq Composite Index slid 43.18 or 0.9% to 4,693.18.

Job Growth Picks Up in December and 2014

U.S. Department of Labor reported non-farm payroll employment in December added 252,000 and the unemployment rate dropped to 5.6%.

The November job additions were revised higher to 353,000 from the previous estimate of 321,000 and the unemployment rate that month was 5.8%.

Despite the steady increase in jobs, wages have barely budged and in December average wage declined 0.2% as energy industry laid off workers.

In 2014, the monthly job addition increased to 246,000 from 194,000 in 2013 as the economy improves and employers steadily adds jobs in manufacturing, construction and retail sectors.

However, labor participation rate in the economy remains near historic low of 59% as many people who are unable to find work have left the job market and stopped looking for work.

U.S. Movers

Bed Bath & Beyond Inc ((BBBY)) plunged 6% or $6.04 to $73.41 after the home furnishing retailer reported net sales in the third-quarter ending in November rose 2.7% to $2.94 billion in the same period a year ago. Comparable store sales in the quarter increased 1.7%.

Net income in the quarter declined 5% to $225.4 million or $1.23 a diluted share compared to $237.2 million or $1.12 from the same quarter last year.

European Markets

Markets in Europe were under pressure as investors debated the size of European Central Bank’s stimulus that is expected to be announced at the next meeting of the policymakers in two weeks.

In London trading, FTSE 100 index fell 0.3% or 22.14 to 6,547.82 and in Frankfurt the DAX index edged down 0.05% or 4.89 to 9,832.72.

In Paris, CAC 40 index slid 0.2% or 8.39 to 4,251.80.

Laird Plc plunged 9.3% to 300.83 pence despite the U.K.-based precision engineered component maker reaffirmed its fourth quarter outlook in the latest trading results.

Sodexo SA slipped 1.9% to €79.84 after the France-based on-site catering service provider reported revenues in the first-quarter ending in December climbed 4.7% to €5.08 billion from €4.86 billion a year ago period.

XL Group Plc ((XL)) after the Ireland-based insurance company agreed to acquire Catlin Group limited for about £2.8 billion or $4.2 billion, a premium of 23.5% to Catlin''s closing share price as of December 16 to expand its property-casualty insurance business.

Asian Markets

Nikkei index in Tokyo gained in subdued trading and the yen traded near 119 against the U.S. dollar. Stable oil prices and low inflation in China also added to caution in Tokyo trading. Convenience store chain operator, Seven & I reported better-than-expected nine-month sales.

Stocks in Tokyo jumped slightly after oil prices stabilized and China reported December inflation flat at 1.5%.

The Nikkei 225 Stock Average gained 30.63 or 0.2% to 17,197.10 and the broader Topix index rose 2.91 to 1,380.58.

The yen strengthened to 118.90 against one dollar.

In Mumbai trading, Sensex Index advanced 183.67 or 0.7% to close at 27,458.38. The CNX Nifty gained 49.90 or 0.6% to 8,284.50.

Infosys Limited climbed 5% to Rs 2,073.60 and the second largest software service provider said net in the third-quarter rose 4.97% to Rs 3,250 crore.

Total revenue advanced 3.40% to Rs 13,796 crore.

Tech Mahindra Limited jumped 4.4% to Rs 2,680.10 and the software service provider agreed to acquire Geneva-based Sofgen Holdings.

Founded in 1999, SOFGEN based in Geneva employs 450 people and provides custom solutions for private banking, retail banking and wealth management companies.

Tech Mahindra is looking to acquire companies to meet the company target to increase through acquisition. The company recently completed the purchase of U.S based Lightbridge Communications Corporation for an enterprise value of $240 million.