Weak Jobs Data Weighs On Stocks
The market opened slightly weak this morning on the heels of a weaker than expected jobs report. The economy added only 92,000 new jobs (consensus 135,000), which means it is running at a below average rate. Also, the unemployment rate ticked up slightly to 4.6%.
Within an hour, the news came out that S&P cut its credit rating on Bear Stearns (BSC) to negative. This caused a wave of selling pressure that took down the brokers first, and with them the whole market deteriorated. From a contrarian point of view, maybe this even will mark a short-term bottom in the group?
Bond yields are moving lower, with the 10-year yield breaking below its 200-day at 4.72%. Oil is also lower again, as Colorado State lowered its hurricane forecast for 2007.
And Asian markets were up nearly across the board, save for Japan. Shanghai made new highs, which bodes well for many of the emerging markets.
I think this whole subprime debacle, the failures of mortgage companies like LEND and AHM, the tanking of homebuilders, the BSC downgrade, coupled with the slight uptick in unemployment increase the likelihood that the Fed cuts rates. Financial crises usually give them cover to do so. They probably won't do it next week, because they are always late to the party-- but they should.