Jobs report sinks Russell 2000
The Russell 2000 (NYSE: IWM) and the other major U.S. indices tumbled as news of a poor jobs report raised fears about the health of the U.S. economy. The small-cap index fell 23.44 points, or 3.15%, to 721.57, its sixth consecutive decline. The Dow Jones Industrial Average (INDU) dropped 256.54 points, or 1.96%, to 12,800.18.
On a year-to-date basis, the Russell 2000 is down 5.80%, while the Dow has lost 3.50% and the S&P 500 has dropped 3.86%.
Stocks fell hard and the bears dominated the session today on news before the start of trading that nonfarm payroll employment rose a paltry 18,000 in December, according to the U.S. Labor Department. Economists were projecting job growth of 70,000 following an upwardly revised figure of 115,000 in November.
“Service sector job gains were offset by sharp job losses in construction and manufacturing,” said Arun Raha, vice president of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, in an email. “Within services, a cautious retail sector hired less than usual this holiday season.”
The unemployment rate jumped to 5% from 4.7%. That translates to a total of 7.7 million unemployed people, an increase of 474,000 from the level in November. Economists were forecasting the jobless rate to rise to 4.8%.
“This slowdown in employment growth, in an environment of high oil prices, soft manufacturing and weak confidence, will soften consumer spending,” Raha continued. Consumption comprises about 70% of U.S. gross domestic product.
Does that mean a recession is all but inevitable? Not necessarily.
“The latest data imply at least a 50/50 chance of recession,” said Raha. “Unemployment insurance claims are still below the typical rate preceding a recession, so a recession may not happen.”
The disappointing numbers on job creation make it more likely that the U.S. Federal Reserve will move to lower the federal funds rate during its next two-day meeting starting Jan. 29. At its previous meeting on Dec. 11, the Fed lowered the rate to 4.25% from 4.50%.
The federal funds rate is the rate at which commercial banks make overnight loans to each other.
Here are the day’s biggest percentage gainers and losers, along with top volume leaders, among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• North Pointe Holdings Corp. (NPTE), up 46% to $15.44 on news it is being acquired by QBE Insurance Group Ltd. (QBE) for $146 million.
• Origin Agritech Ltd. (SEED), up 33% to $9.74.
• AZZ Inc. (AZZ), up 13% to $32.53 on news of an increase in fiscal third-quarter net profit.
Biggest percentage losers:
• Arctic Cat Inc. (ACAT), down 24% to $9.21 on news it has lowered its outlook for the fourth quarter and the fiscal year.
• Micrel, Inc. (MCRL), down 20% to $6.28 on news it has revised its earnings and revenue outlook for the fourth quarter of fiscal 2007.
• Medis Technologies Ltd. (MDTL), down 19% to $11.97 on news that negotiations for the launch of a new product have been prolonged.
Volume leaders:
• Akeena Solar, Inc. (AKNS) 13,203,200 shares traded.
• Origin Agritech Ltd. (SEED) 12,106,500 shares traded.
• Micrel, Inc. (MCRL) 8,509,300 shares traded.
The day saw 290 small-cap stocks set 52-week lows, while four caps established 52-week highs.
