Sentiment Soured by Slew of Disappointing Dow Data
Stocks are under pressure in early action after a plethora of Dow components announced disappointing data, which included Merck & Co. issuing EPS guidance below expectations, DuPont saying it now expects a loss and will cut its workforce, and AT&T announced it will eliminate 12,000 jobs. Not even fellow Dow member Wal-Mart's better-than-expected November same-store sales, to highlight generally disappointing results, and a drop in jobless claims are enough to soothe some of the sting. Treasuries are mostly higher and overseas, markets are lower as Europe deciphers a slew of central bank rate cuts.
As of 8:43 a.m. ET, the December S&P 500 Index Globex futures contract is 15 points below fair value, the Nasdaq 100 Index is 26 points below fair value, and the DJIA is 123 points below fair value. Crude oil is down $1.09 to $45.70 per barrel, and gold is down $4.60 per ounce at $765.90. The overnight LIBOR rate fell 36 bp to 0.52%, and the three-month LIBOR rate dropped 1 bp to 2.19%.
Jobless claims fall but continuing claims stand tall
Weekly initial jobless claims fell 21,000 to 509,000, below the Bloomberg forecast of 540,000. Last week's figure was revised higher by 1,000 claims. The four-week moving average rose 6,250 to 524,500, and continuing claims gained 89,000 to 4,087,000.Treasuries are mostly higher.
Judging by yesterday's worse-than-expected ADP payroll report and the elevated jobless claims, the gloom and doom on the labor front continues. This is also evident by economists' estimates that the government will report a steep 330,000 job decline in tomorrow's nonfarm payroll report by the Labor Department. Another month of contraction in payrolls would mark the eleventh-straight monthly decline and in the 70-year history of the labor report, there have only been seven other periods in which the economy shed jobs for 10 or more consecutive months. Factory orders for October are due out later in morning action and are forecast to fall by 4.5%.
Rate and job cuts dominate headlines in Europe
Stocks in Europe were higher in afternoon action but are showing some volatility and are now trading lower as traders grapple with a plethora of interest rate cuts from some of the key central banks in the eurozone region. First, Sweden's central bank slashed its benchmark rate by 175 basis points to 2.0%, which is the biggest reduction since 1992, according to Bloomberg. The Swedish central bank said, "There has been an unexpectedly rapid and clear deterioration in economic activity since October," as it also predicted a recession next year. Additionally, the Bank of England cut its interest rate by 100 basis points to 2.0%, the lowest level since 1951 and in line with expectations. The BoE noted that, "Conditions in money and credit markets remain extremely difficult," and suggested that it was unlikely that "a normal volume of lending would be restored without further measures." Meanwhile the European Central Bank slashed its key lending rate a larger-than-expected 75 basis points to 2.5%.
In equity news, Credit Suisse (CS $23) is higher after it said it will eliminate 5,300 jobs and get rid off bonuses for its top executives after suffering about 3 billion francs of losses in the past two months. The measures are expected to save about 2 billion francs for Switzerland's second-largest bank and will go to help it manage through "continuing challenging market conditions," its CEO said.
Asia lower following dismal capital spending in Japan
Stocks in Asia were broadly lower after yesterday's solid gains, led by weakness in Japan following a key reading on capital spending that showed Japanese businesses cut spending for the sixth-straight quarter and at the fastest pace in six years. However, shares of Nippon Mining (NMHDF $6) surged after agreeing to merge with Nippon Oil (NPOIF $4). Shares of Nippon Oil also advanced as the deal would be the largest oil merger in Japan since 1999, according to Bloomberg. Elsewhere, Sanyo Electric (SANYF $2) tumbled after Goldman Sachs (GS $69) said it may increase its stake in the firm to challenge a takeover offer by Panasonic (PC $12).
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