Friday, July 8, 2011

Disappointing jobs report sinks markets

Stocks gave up 15% of their recent rally, Dow dropped 136, decliners over advancers 4-1 & NAZ fell 37. Banks have been market leaders lately & continued today. The 210ish ceiling for the Financial Index was too much to hold. The next stop could test the lows around 197.

S&P 500 Financials Sector Index

Value	207.10
Change	-3.71 (-1.8%)

The MLP index fell back 1½ to 375 & the REIT index dropped 3 (from yesterday's yearly high) to 249. Junk bond funds were little changed but Treasuries rallied on the dreary economic news with the yield on the 10 year bond near 3%. Oil dropped, paring a 2nd weekly gain, after the US added fewer jobs than forecast & the unemployment rate climbed, damping optimism for the economic rebound & fuel demand growth. Gold remains strong for its defensive qualities.

JPMorgan Chase Capital XVI (AMJ)

The latest daily market update below:

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.383%
U.S. 10-year	3.027%

CLQ11.NYM

...Crude Oil Aug 11

...96.01

...

2.66

(2.7%)

GCN11.CMX

...Gold Jul 11

.......1,527.00

...

3.20

(0.2%)

Photo: Yahoo

Hiring slowed to a near-standstill in Jun as employers added the fewest jobs in 9 months & the unemployment rate rose to 9.2%. The economy generated only 18K jobs according to the Labor Dept & the number of jobs added in May was revised down to 25K. Businesses added just 57K, the fewest in more than a year. Govs cut 39K, over the past 8 months federal, state & local govs have cut 238K positions. Companies pulled back on hiring after adding an average of 215K jobs per month from Feb-Apr. The economy typically needs to add 125K jobs per month just to keep up with population growth & at least twice that many jobs are needed to bring down the unemployment rate. Temporary factors such as high gas prices & supply-chain disruptions stemming from the Japan may have forced some employers to hold back on adding workers. In addition, the weak economy & slow hiring is causing more people to simply give up looking for work. More than a quarter-million stopped their job searches in Jun which kept the unemployment rate from rising even further. Including discouraged workers & those working part time, but who would prefer full-time work, the "under-employment" rate jumped from 15.8% to 16.2%. Out of 6 workers, one is being pinched by this economy. Average hourly wages declined last month. The number of unemployed rose almost 175K to 14.1M, pushing up the unemployment rate.

U.S. Payrolls Rise 18,000; Jobless Rate Hits 9.2%

Vacancies at shopping centers rose for the first time in a year during Q2 as retail properties lagged the rebound by offices & apartments according to Reis, Inc. The vacancy rate at neighborhood & community shopping centers rose to 11% from 10.9%, where it had stood since Q2 of 2010 The rate for regional & superregional malls increased to 9.3%, the highest since Reis began collecting data in 2000. Shopping center asking rents & the actual rents paid by tenants after price breaks were unchanged from Q1, the 12th consecutive qtr of no change Retailers are cutting back on space & closing stores as unemployment remains above 9% & online competition grows. But apartment vacancies fell to 6% in Q2, the lowest since the end of 2007, from 7.8% a year earlier & downtown office vacancies dropped to 13.9%, the lowest since mid- 2009, from 14.8% last year. One more indication that the economy remains soggy at best.

U.S. Shopping Center Vacancies Rise

There is no way around it, the jobs report was bad. Temporary factors may have contributed, but even those forces will not evaporate overnight. Earlier signals in Q2 signalling that the recovery was sputtering are haunting the markets. Sluggishness for retail shopping centers is another reminder that this recovery is not going well. Next week earnings season begins & the reports could be worse than the optimists had foretasted. Everybody agrees that US will have to raise the debt ceiling, one way or another, but that could be touchy since it will involve budget cuts that slow the recovery.