Stocks are called lower on the opening based on pre-opening weakness. After an uneventful night, equities markets sold off sharply following a worse than expected U.S. Non-Farm Payrolls Report. The bad news adds to the developing pessimism about the economy and may put pressure on the Federal Reserve to take make more aggressive monetary moves to boost the economy.
This morning’s Non-Farm Payrolls Report showed a drop of 131,000 jobs in July. This included an increase of 71,000 private payrolls jobs. Pre-report guesses were for a loss of between 65,000 and 90,000 jobs, private payrolls were expected to increase by 100,000.
The country’s unemployment rate held steady at 9.5% after a call for a rise to 9.6%.
Following the report, the Dollar plunged against most majors, Treasury markets rose while equity markets fell. Gold is soaring and crude oil is trading lower.
The jobs report is disappointing but the news is not earth-shattering. Stock market losses are building ahead of the opening. This could translate into sharply lower markets by the end of the day. On the other hand, the private sector did add jobs. Some traders may treat this news as a silver-lining, thereby slowing down the rate of decline.
September Treasury Bonds and Treasury Notes are selling off on the jobs news. The weaker than expected jobs number is likely to put pressure on the Fed to renew its quantitative easing program following its next meeting on August 10. In addition, the market is pricing in lower interest rates well into 2011.
The Dollar is mostly losing ground to the Euro and the British Pound. While both the Euro Zone and U.K. seem to be on path to shore up their economies, the U.S. is still floundering with a weakening economy and a fresh round of stimuli. The EZ’s Trichet sounded optimistic yesterday, following the European Central Bank policy statement while the Fed’s Bernanke continues to promote a gloomy outlook.
The weak outlook for the economy is pressuring crude oil. Traders feel that demand is likely to fall for energy if jobs continue to be lost.
December Gold is trading sharply higher. Money is likely leaving the paper asset markets and moving into the hard asset gold market. The weaker Dollar is contributing to the strength in the gold market.
Although the jobs data was not that bearish, investors are definitely feeling disappointed. Expectations are for the equity markets to feel downside pressure based on the way money is being allocated between fixed income, gold and foreign currency markets.
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