Morning Update

Labor Pains

Stocks are lower in early action after extending losses following a 533,000 job decline in US nonfarm payrolls and the highest unemployment rate in 15 years. On the equity front, Boeing is reportedly set to further delay its Dreamliner jet and Yum Brands offered updated EPS guidance. Treasuries are slightly lower despite the dismal job report and overseas, Europe is under pressure and Asia responded relatively well to yesterday's late-day drop in the US.

As of 8:45 a.m. ET, the December S&P 500 Index Globex futures contract is 21 points below fair value, the Nasdaq 100 Index is 21 points below fair value, and the DJIA is 153 points below fair value. Crude oil is down $1.29 to $42.38 per barrel, and gold is down $12.00 per ounce at $753.50. The overnight LIBOR rate fell 24 bp to 0.28%, and the three-month LIBOR rate was unchanged at 2.19%.

The Wall Street Journal is reporting that Dow member Boeing (BA $39 ¹) may further delay first deliveries of its flagship Dreamliner by at least six months, due mostly to the fallout from the recently resolved machinists strike. Citing people familiar with the matter, the WSJ said BA officials are expected to announce later this month that first deliveries of the jet might not occur until the summer of 2010, more than two years after the jet was originally scheduled to enter service. BA did not comment on the report.

Job scene shows payrolls severely leaned

Nonfarm payrolls dropped 533,000 in November, much more than the Bloomberg forecast of a 335,000 job decline. October was revised from a loss of 240,000 to a decline of 320,000, and September was revised from a drop of 284,000 to 403,000. The unemployment rate rose from 6.5% to 6.7%, the highest since October 1993 but slightly below the Bloomberg estimate of 6.8%. Average hourly earnings increased 0.4%, above the 0.2% forecast, and the year-over-year rate increased from 3.6% to 3.7%. Treasuries are slightly lower despite the disappointing labor data.

Europe broadly lower on economic worries and commodity selling fury

Even after yesterday's steep interest rate cuts from Sweden, the UK, and the European Central Bank, stocks in Europe are solidly lower in afternoon action. Fears about the economy, amplified by today's labor report in the US that showed employment conditions deteriorated sharply in the world's largest economy, are sapping sentiment across the pond. Energy and mining issues are leading the broad-based decline as crude oil prices reached the lowest level since January 2005 yesterday and the global recession is weighing on the outlook of demand for key industrial metals, which is sending BHP Billiton (BHP $35) down about 5%, as copper prices are poised to fall for the seventh-straight session in London, which is the largest losing streak in 10 years according to Bloomberg.

Muted response in Asia to US final-hour flop

As the US markets sold off in the final hour of trading yesterday to close solidly lower, stocks in Asia showed a relatively resilient response to the flop on Wall Street. Stocks in Japan finished modestly lower in subdued action as traders played their cards close to the vest ahead of the results of the labor report in the US, with the Nikkei 225 down 0.1% and the broader Topix Index falling 0.4%. The brunt of the blow was felt in the banking sector after Goldman Sachs cut price targets on the nation's largest banks. However, South Korea's Kospi advanced 2.1%, China's Shanghai Index rose 0.9%, and Hong Kong's Hang Seng jumped 2.5%, aided by speculation that the Chinese government may be looking at injecting funds in the country's banks, according to the Financial Times.