Weak Jobs Data Hammers Stocks and Oil
Published on Friday, 04 May 2012 18:22 Written by Christopher Lynn
New York, May 4th (TradersHuddle.com) – Stocks tumbled, with the S&P 500 and the NASDAQ logging their worst week this year, after sluggish job growth, spurred worries over the strength of the economic recovery. The weaker than expected employment figures provided additional signals that the economy is settling on a sluggish growth pace not bad enough for the Fed to act and not fast enough to justify stock valuations.
The Dow Jones Industrial Average fell 168.32 points, or 1.27%. The S&P 500 index lost 22.47 points or 1.61%, while the NASDAQ tumbled 67.96 points, or 2.25%.
For the week, the Dow lost 1.44%, while the NASDAQ tumbled 3.68%, and the S&P 500 retreated 2.44%.
The market started under pressure after futures drifted lower following the disappointing non-farm payrolls data, which signaled job growth slowed with the economy adding 115,000 jobs in April versus the 162,000 expected. The unemployment rate fell to 8.1% but the labor participation rate hit the lowest level since 1981.
The weakness continued through the morning, with stocks and commodities on a broad retreat, particularly as the jobs report was bad but not bad enough to force the Fed back into action.
Most of the S&P 500 sectors closed with significant losses, with energy and technology losing more than 2%, while consumer staples closed with a loss of 0.8% and the utilities sector was the only one that was able to edged into positive territory. The energy sector suffered from a plunge of 4.7% in crude oil prices, as traders came to grips with the fact that the U.S. economic recovery is not as robust as previously hoped and that oil demand is waning while supplies are increasing. Also, pressuring prices was the announcement that the CME was raising margins on member firms on the NYMEX crude oil contract, which would make holding these positions more expensive, and reducing liquidity
Southwestern Energy (NYSE: SWN) plunged to the bottom of the S&P 500, as shares tumbled more than 7% in the session after the company missed earnings expectations. The company said that its first quarter profit dropped 21% as softer realized natural gas prices and higher expenses pressured margins. On the flip side, Chesapeake Energy (NYSE: CHK) was a surprise winner on the day. On heavy volume, the stock gained almost 1.2% despite the company announcing an informal SEC inquiry and Fitch ratings saying it has lowered its outlook on the company to negative from stable.
The technology sector was also under heavy pressure amid the weak economic data, dragging the NASDAQ to one of its worst sessions in the year and its weakest weekly performance so far this year. Apple (NASDAQ: AAPL) continued to be a dragged on the major indices and the broad market as the iPad and iPhone maker fell 2.85% to $565.25 after it broke below its 50day moving average in the prior session. The stock lost 6% this week and its nearly 12% down from its all-time high of $644. Last night rival Samsung unveiled its new Galaxy smartphone with lackluster response; however analysts expect strong sales on a marketing campaign that will be linking the device with the Olympic games.
Also weighing on the NASDAQ, shares of First Solar (NASDAQ: FSLR) tumbled the most in the sector, closing with a 6.25% loss for the day. First Solar posted a new 52-week low at $16.80 on reaction to an unexpected quarterly loss. The company missed on both earnings and revenues by a wide margin, as it raised its full-year profit forecast, but thanks to decreasing production costs. First Solar announced that Chief Commercial Officer James Hughes would be its new CEO, replacing company founder and Chairman Mike Ahearn.
Other weak names in the sector were Teradata Corp. (NYSE: TDC) and Sprint Nextel (NYSE: S). Teradata tumbled more than 5%, giving back most of its gains from the prior session. Mizuho raised its target price to $85 from $72, while Stifel Nicolaus initiated its coverage with a Hold. Yesterday, Teradata beat earnings expectations by $0.04 per share on revenues that were above consensus. Meanwhile Sprint fell 4.8% to $2.36.
There was a lot of buzz for the Facebook IPO, as management from the social network company was visiting the top underwriters in the IPO. It appears that Facebook will be valued around $96 billion amid increased interest even from the retail investor. Along those lines, LinkedIn (NYSE: LNKD) was a notable outperformer in the day, as shares rallied more than 7% to $117.30 after the professional social networking site posted quarterly results that beat on both the top and the bottom lines. Several brokerage houses raised their target price following the results.
Financials were also under heavy pressure. Bank of America (NYSE: BAC) tumbled more than 3% to the bottom of the Dow Jones Industrial Average amid worries that sluggish job growth will lead to higher than expected credit losses. Rival JPMorgan (NYSE: JPM) fell 2.93% to $41.75 after CLSA downgraded the stock to Underperform from Outperform.
American International Group (NYSE: AIG) tumbled 3.8% to $32.83 despite the company beating EPS consensus. The company reported first quarter earnings of $1.65 per share, $0.74 better than consensus. In after hours, the stock tumbled another 4% on news that the Treasury will be announcing a public offering of AIG common shares, of which AIG intends to buy up to $2 billion.
Elsewhere, Leap Frog (NYSE LF) surged more than 14% after the company posted much better than expected quarterly results, as it said its loss was much smaller than expected amid strong demand for its LeapPad learning tablet. While, Kraft Foods (NYSE: KFT) lost 0.9% to $39.25 after posting quarterly results that edged above expectations, while reaffirming its full year growth targets. Stifel Nicolaus raised its target price to $44 from $42.
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