Fundamentals

US Stocks Plunge On Concerns About Jobs

U.S. Session Key Developments

•    Initial Jobless Claims Unexpectedly Exceed Estimates
•    Insurance On Sovereign Debt Soars In Europe
•    Commodities Plummet On Risks To Recovery

US Stocks sank to their lowest level in almost three months and the Dow Jones Industrial Average threatens to break the psychologically significant 10,000 level.  The index, which measures the performance of blue chip issues, closed right above the level at 10,002, after briefly trading to 9,998 immediately before the close.  Investors dragged stocks and commodities lower on concerns that rising unemployment and sovereign debt concerns threaten to destabilize the economic recovery.  Portuguese government credit default swaps soared 27 basis points to a record 223, as investors grow nervous about Portugal and Spain’s deficit-reduction plans on top of the concerns about Greece.  Benchmark equity indices in Portugal and Spain dropped the most in 15 months.  Initial jobless claims for the week ending January 30^th were 480,000.  That is the highest reading in seven weeks and 25,000 claims higher than the average of analysts’ estimates.  The jobs report did little to reassure investors ahead of tomorrow’s more important Non-Farm Payrolls report.  A disappointing reading tomorrow could send the Dow through 10,000, exposing 9,679, the November 2^nd low, as the next level of support.  In the commodity space, the threats to the economic revival as well as a stronger dollar sent the CRB Commodity Index to a new three-month low and a 2.6 percent loss for the session.  Weakness among commodities was broad based as crude lost 5.13 percent, its biggest dive in 6 months, to end the day at 73.03.  Gold dropped 4.39 percent to $1,063.  Meanwhile the greenback appreciated against nine out of the ten G10 currencies, with the traditionally risk-averse Japanese Yen as the lone exception.  High-yielding commodity currencies like the Australian and Kiwi dollars were among the worst performers with both losing over 2 percent on the day.  The dollar index traded above 80 for the first time since July 2009.

DJIA 30                     10,002.18                    -268.37                        -2.61%
Only one company in the Dow – Cisco Systems Inc. – advanced today as the index traded below 10,000 for the first time since November before settling just above that level at the close.  Cisco advanced after it had posted better than expected earnings after the close yesterday.  The decline was led by financials with Dow components JPMorgan Chase and Bank of America down 4.82 and 5.02 percent respectively.  Banks fells as MasterCard reported profits that missed estimates and concern over sovereign debt increased.

S&P 500                     1,063.11                         -34.17                           -3.11%
The broad-base S&P 500 was the worst performer of the three major indices with only 11 issues advancing.  The decline was led by Basic Materials which dropped 4.31 percent.  Basic Materials stocks dropped as the CRB Commodity Index fell to its lowest level in three months.  Energy stocks were also down 3.83 percent as oil had its biggest drop in six months.

NASDAQ                    2125.43                        -65.48                           -2.99%
The tech heavy Nasdaq Composite Index fell as tech stocks finished the day down 2.91 percent.  Big name tech stocks like Apple, Microsoft, and Google were down 3.60, 2.76, and 2.60 percent respectively as traders grew jittery about jobs after a report showed more claims for unemployment insurance than expected.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com