Stock futures drop before unemployment report

December 5, 2008 4:57:12 AM PST
Wall Street was on edge Friday as investors waited to learn how many jobs were lost as employers slashed their payrolls in November. Stock index futures were trading moderately lower.

The Labor Department's monthly employment report is expected to show that the unemployment rate soared to 6.8 percent in November from 6.5 percent in October and that companies cut another 320,000 jobs. That would represent the deepest cut to monthly payrolls since October 2001, when the economy was suffering through a recession following the Sept. 11 terrorist attacks. The report is due at 8:30 a.m. EST.

Employers cut 1.2 million jobs through October. And the layoffs keep coming - on Thursday, bellwether companies like AT&T Inc. and DuPont Co. announced they were cutting thousands of jobs.

The fear on Wall Street is that a rising unemployment rate will, among other things, lead to a more severe pullback in consumer spending, which is a crucial component to helping the economy rebound. Weak retail sales reports for the month of November released Thursday added to these concerns.

Meanwhile, investors also are awaiting a second day of congressional hearings with the heads of Detroit's top three automakers, who are appearing on Capitol Hill in an effort to save their troubled industry.

General Motors Corp., Ford Motor Co. and Chrysler LLC are collectively seeking $34 billion in emergency funding. While the market largely expects the companies to win some sort of government aid, support for the troubled carmakers wasn't guaranteed.

Later Friday, the Federal Reserve will release consumer credit data for October.

Dow Jones industrial average futures fell 48, or 0.57 percent, to 8,354. Standard & Poor's 500 index futures fell 7.20, or 0.85 percent, to 840.30, while Nasdaq 100 index futures fell 12.00, or 1.06 percent, to 1,123.00.

Stocks wavered Thursday before tumbling in the final hour of trading as investors grew increasingly cautious ahead of the employment report. The major indexes each fell more than 2.5 percent and the Dow Jones industrial average dropped 216 points after finishing higher in seven of the previous eight sessions.

While some analysts have been hopeful that the string of recent gains signals some stability may be returning to the market, many warn that much volatility remains as Wall Street struggles to emerge from bear territory.

The government's consideration of additional moves to boost the waning housing market provided little encouragement for investors Thursday.

Federal Reserve Chairman Ben Bernanke called on the government to ramp up efforts to stem foreclosures, while the Treasury Department weighed plans to possibly lower the rate on 30-year mortgages. It is possible that Treasury Secretary Henry Paulson will ask Congress for the second $350 billion installment of the $700 billion financial bailout package to finance the effort.

Also Friday, shareholders of Bank of America Corp. and Merrill Lynch & Co. will vote on the combination of the companies. The deal, which is expected to be approved, would create the nation's largest financial services company.

Bank of America agreed to buy Merrill for $50 billion after the collapse of rival investment firm Lehman Brothers Holdings Inc. in September raised doubts about the viability of indepedent investment banks in general. The value of the all-stock deal has since fallen to about $20 billion, based on Bank of America's Thursday closing price of $14.34.

Bond prices fell early Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.57 percent from 2.56 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose just slightly to 0.02 percent from below 0.01 percent late Thursday, still indicating extreme fear among investors.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 22 cents to $43.89 a barrel in electronic trading on the New York Mercantile Exchange. Concerns about the economy and weakening energy demand have kept oil prices down near four-year lows. The contract has fallen a staggering 70 percent since peaking at $147.27 in July.

Optimism that buoyed some overseas markets following massive interest rate cuts across Europe Thursday deflated ahead of the U.S. jobs report.

Japan's Nikkei stock average dipped 0.08 percent. In afternoon trading, Britain's FTSE 100 was down 1.04 percent, Germany's DAX index was down 2.60 percent, and France's CAC-40 was down 3.10 percent.

---

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Morey money-related links:

Load Comments