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Market Recap: Stocks Plunge On Jobs Report


Disappointing economic data sent bulls running. Dow plunges 250 points.

Investors showed little desire to take home stocks for the weekend. The Dow Industrials tumbled -250 points, or -1.96% to 12800, the S&P 500 fell -35 points, or -2.46% to 1411, and the Nasdaq Composite fell -98 points, or -3.77% to 2504.

Trouble began with the release of this morning's job report. The Labor Department said nonfarm payrolls grew by just 18,000 for the month of December, the worst in five years. Economists had expected a figure of 70,000. Further, the unemployment rate rose to 5.0% versus expectations of 4.8%.

"I think this morning's employment number seals whether we are or are not in (or about to enter into) a recession. Do recessions = bear markets? Do bear markets = recessions? Semantics for now in my humble opinion… " said Professor Fil Zucchi.

In addition, the Institute for Supply Management's (ISM) index of non-manufacturing businesses fell to 53.9 vs. 54.1 the prior month marking the slowest pace in nine months. Analyst expectations called for a figure of 53.5. Professor Kevin Depew noted the importance of this measure stating "non-manufacturing business make up nearly 90% of the economy. With the U.S. no longer a manufacturing-dependent economy, service industries are critical to economic growth." The data immediately caused a broad based sell-off. Notable performances in the financial sector included Bear Stearns (BSC) falling -5.92%, Lehman Brothers (LEH) losing -4.34, and the broader Philadelphia Bank Index (BKX) losing -3.34%.

"…the XLF, BKX, XBD, will all have broken down and usher in a potential waterfall decline in financials. The stock market is catching on. Rising commodity prices, slowing productivity growth, higher cost of credit, no new jobs and a slowing economy equals lower profits," said Professor Bennet Sedacca, "So be careful what E you are using in P/E. It is likely too high. This is simple arithmetic known as a profits recession." For more read Professor Depew's Five Things You Need To Know.

The tech sector fell victim to today's drubbing. Research in Motion (RIMM) and Apple (AAPL) both lost over 7% today, and Google (GOOG) lost -4.0%. Professor Fil Zucchi noted in his article the performances of the telco tech companies, "Either someone has figured out that published estimates and/or guidance are no longer good; and/or the multiples are getting downshifted."

Commodities finished lower. Crude oil fell -1.33 to 97.85. Gold futures fell -5.70 to 863.70. Silver lost -0.036 to 15.346, and copper fell -3.15 to 314.15.

For more summaries, click on Minyanville's Buzz Bits.

Idea Flow

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: AMAT, NVLS, INTC, VMI, NYX, VMW, INTC, PBR, RIMM, PRGN, QMAR, BMRN, FCSX, EMC, BSC

Some bearish trade or investment ideas: ITRI, FFIV, XBD, XLF, CBRL, GM, XLF, BKX, XBD

Be safe and have a great weekend!
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No positions in stocks mentioned.

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