Continuing Job Losses Dampen Recovery Hopes
Stock futures lost ground Wednesday after a private sector report on unemployment failed to ease investors’ concerns about job losses.
Futures had been little changed, but moved slightly lower after the ADP National Employment Report said employment fell by 298,000 in August following a revised loss of 360,000 jobs in July. It was the smallest drop since September 2008, but ADP said employment is likely to decline for at least several more months.
A separate report showing productivity rose at the fastest pace in nearly 6 years in the second quarter helped limit the decline in stock futures.
The ADP jobs report is a closely watched precursor to the Labor Department’s crucial monthly reading on the jobs market, which is due Friday.
With the housing and manufacturing industries starting to show signs of healing, the biggest concern on Wall Street is layoffs. Job cuts have to slow for consumers to feel better about spending money, which the economy is depending on for a solid recovery.
The stock market is already on edge after a big sell-off on Tuesday that took the major indexes down about 2 percent. Rumors of a major bank failure triggered the selling, adding to the growing anxiety on Wall Street that stocks are overvalued considering their runup of more than 50 percent since March.
Ahead of the market’s open, Dow Jones industrial average futures fell 19, or 0.2 percent, to 9,284. Standard & Poor’s 500 index futures fell 2.70, or 0.3 percent, to 993.80, while Nasdaq 100 index futures fell 6, or 0.4 percent, to 1,589.50.
Overseas markets dropped, taking a cue from the sell-off Tuesday in U.S. markets. Japan’s Nikkei stock average tumbled 2.4 percent and Hong Kong’s Hang Seng index fell 1.8 percent. Britain’s FTSE 100 slipped 0.1 percent in afternoon trading, while Germany’s DAX index fell 0.4 percent and France’s CAC-40 fell 0.5 percent.
Bond prices mostly fell in early trading Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.37 percent from 3.36 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices dipped.
Oil prices rebounded slightly, rising 48 cents to $68.53 a barrel in premarket trading on the New York Mercantile Exchange ahead of the Energy Department’s weekly report on crude supplies.
Later Wednesday morning, the Commerce Department will issue data on factory orders for July.
The stock market’s massive spring and summer rally came to a halt Tuesday, with the Dow Jones industrials falling 185 points. The index is down 270 points since Friday, its biggest drop over three days since July 7, when it lost 341 points.
Stocks sold off even in the midst of data showing the first month of growth in manufacturing activity since January 2008, and the sixth straight monthly increase in pending home sales. Investors have largely come to expect improvements in manufacturing and housing, which have already been showing signs of healing. But still-rising unemployment and sluggish consumer confidence remain big concerns.
Though analysts had been expecting a pullback in stocks for weeks, the market continued to carve out modest gains, with the Dow rising eight straight days before Friday, putting in its longest winning streak of the year. But trading was choppy, evidence of investors’ growing hesitance to put more money in stocks considering the economy’s gradual recovery.
“There is a power struggle going on on Wall Street right now between the people that lost a lot of money and want to take stocks up and those that are really looking at fundamentals and want to take their foot off the gas,” said Michael Kane, founder and CEO of Hedgeable.com.
Analysts expect trading to remain volatile through the fall, historically a rough time for stocks.
9/2/2009 8:57 AM SARA LEPRO, AP Business Writer NEW YORK