Jobs gloom settles in
Small-cap stocks drifted lower, pulled down by concerns over sizable upward revisions in recent employment reports, which countered any upside glee when the headline non-farm figure was below “worst-case” scenarios. The market is now in a position today of working out whether this jobs report is already priced into the market, or reflects a little darker picture than current stock market valuations. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was down 12.03, or 2.46% at 489.68.
The Labor Department report showed that 524,000 non-farm payroll jobs were lost in December, which was in line with the average analyst forecast for a decline of 525,000 jobs. However, “whisper” numbers were upward of 650,000, so the key headline figure on the jobs release was basically better than feared. That said, some of the other details were not pretty. For instance, the unemployment rate climbed to 7.2%, which marked the highest level in 16 years, and which was above the 7.0% consensus projection. It was also the largest year-over-year increase in the unemployment rate since the 1982 recession. What’s more, the Labor Department dramatically revised job loss figures for October and November, adding another 150,000-plus to the jobs loss total. In just four months, almost two million jobs have been lost in the U.S. Even more numbing is the fact that 2.6 million jobs were shed during 2008, the largest one-year total since 1945.
In an interview on CNBC after the jobs report, PIMCO chief Bill Gross said that “we’re only halfway home” with three million jobs lost and that three million more will be lost as the unemployment rates climbs toward 9%. He also said that the Obama stimulus plans were a step in the right direction. PIMCO operates the world’s largest bond house.
Crude oil prices were down about $0.80 a barrel on the stock market opening, pulled down by concerns over the soft employment data, which points to a prolonged recession for the world’s biggest consumer of energy. If the crude oil market continues to slip today, it could weigh on energy stocks, particularly if the U.S. dollar retains a bid. Shortly after the open, the dollar was up about 1.3% against the euro. Within the energy arena, Dow component Chevron Corp. (NYSE:CVX) issued a profit warning, which could ripple through energy companies.
Individual small-caps on the move this morning include Orexigen Therapeutics Inc. (Nasdaq:OREX), which gapped lower and tumbled 23% on news that a weight-loss drug trial did not meet desired results. Greenbrier Companies Inc. (NYSE:GBX), a railroad transport company, fell 15% after reporting quarterly results and declaring dividends. Central Gold Trust (AMEX:GTU) fell 14% with the gold market decline and amid news that the firm entered an underwriter deal. On the upside, Healthways Inc. (Nasdaq:HWAY) rose 12% as the healthcare solutions firm reported earnings.
The post-jobs slide below 491 support raises a big caution flag for small caps. Sustained action below that point would suggest further downside probing. There is support along 484, but the next key target below 491 is down around 473. If the market can rally back above 491, then resistance today is at 497, 508 and 514.50.
