US Unemployment Passes 10%: Financial Spread Betting Market News

Posted on | November 6, 2009 |

If you’re looking for encouraging signs, take a look at the level of the DJIA and the S&P 500 index and you’ll see signs of Wall Street attempting to defy some pretty miserable employment numbers by rebounding into positive territory.

We weren’t expecting great things from the non-farm payroll figures which came out at 1.30pm (London time), but the numbers being bandied around by analysts in advance of the announcement were a lot less ugly than those ultimately reported by the US Labour Department.

A survey conducted by Reuters suggested that 175,000 jobs had been shed by the US economy last month, and that the unemployment rate had risen to around 9.9%. In actuality, though, the unemployment rate had shot up to 10.2% – the highest level of unemployment seen since 1983 – and it was 190,000 jobs that were cut by employers.

Now, these numbers were by no means disastrous, but after the groundswell of positive sentiment that had accompanied the better-than-expected jobless claims figures yesterday, this news came as something of a gut-shot for the market and shortly following the opening on Wall Street there was an inevitable knee-jerk reaction and share prices quickly sank, with the Dow Jones Industrial Average dipping as low as 9936 (-0.7%) at one point.

Upgrades to a couple of key stocks shone a ray of encouragement though, and by 3pm most stocks were out of the red.

Bernstein Wealth Management upgraded Amazon.com to ‘outperform’ and raised its price target from $125 per share to $160, leading to a surge in the share price as soon as the market opened. By 3.30pm Amazon was up $4.64 or 3.8% at $125.25.

Bernstein and Oppenheimer & Co both upgraded US bellwether General Electric, which climbed 5.7% to $15.31, which was single-handedly responsible for adding around 6 points to the DJIA index.

At 3pm wholesale inventories data were announced and offered further positive signs: the figures showed that stocks fell for the thirteenth consecutive month and that sales rose for the fifth straight month. The 0.9% drop in inventories was not quite as good as had been anticipated by economists though. A Reuters poll had forecast a 1% drop.

And so, for a brief moment, it looked like the market had shrugged off the employment situation as a lagging indicator and instead chosen to embrace the upbeat news.

But this is 2009: confidence in the financial markets is still a fragile thing, and bearish attitudes once again began to hold sway as the afternoon wore on, with more and more stocks slipping back into the red. The price of gold, perhaps the ultimate flight to quality instrument, soared above $1100 for the first time ever.

By 4pm, the overall direction of the market was still hanging in the balance, with stock index levels just about flat. There is a sense of investors exhibiting caution, taking stock, looking for clearer signs. They will, no doubt, be looking towards the G20 meeting this weekend for an inkling of which direction the winds of commerce are blowing.

By Peter Martin, Director, Client Education and Training, IG Index.

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