Huge One Day Job Losses Affect the Market

[Excerpted from Bill Cara's Daily Report]

These are extraordinary times that call for swift and extraordinary action” said President Obama in response to the announcements of more than 72,000 job cuts in a single day among a very few corporations. Knowing that there will be a strong economic stimulus program to come from the White House, corporations are putting their houses in order. Never have job cuts come so quickly.

As the news rolled out from the broadcast media, what had been a very bullish start to the day in New York, as well as earlier in Japan and Europe, turned negative. But bad news is quick to be dismissed at this point, so the equity market turned positive again into the close.

The new President spoke often and with vigor during the day, saving his best perhaps for the evening swearing in of his new Treasury Secretary Tim Geithner.

By the end of the session, the DJIA (+38.47 +0.48% to 8116.03), S&P 500 (+4.62 +0.56% to 836.57) and NASDAQ Composite (+12.17 +0.82% to 1489.46) all closed higher. So too did the Toronto Composite (+28.54 +0.33% to 8656.51) and Venture Board (+7.47 +0.87% to 867.16).

Earlier Monday, the German DAX (+3.54% to 4326.9) and UK FTSE 100 (+3.86% to 4209.0) were sent soaring after Barclays Bank stated that the company was financially strong and would not require a government bail-out. The shares in Europe gained +73% on the day. The French CAC had been very strong, but appears to have closed flat.

The Nikkei 225 dropped -0.81% to close at 7682.14. Most of the other markets were closed for Chinese New Year celebrations.

All in all, though, volume in NY was low and market prices were tight. Traders seem nervous.

The winning sectors were Utilities (XLU +2.4%) and Energy (XLE +1.9%), while the losers were Financials (XLF -1.8%) and Basic Materials (-1.2%).

Among industry groups, the action was particularly quiet. Chemicals were weak as were the Banks ($BKS -3.0%). Oil Services and Big Oil gained between +2.1% and +2.9%.

As for the Cara 100, there really was not much price action. The biggest winners were Royal Bank of Canada (RY +5.6%) and Brunswick Corp (BC +4.1%). The losers were led south by Dow (DOW -7.6%), on concerns that a Rohm & Haas take-cover might get stalled at the last minute on the bank financing. Nucor (NUE -5.0%) was down after traders were told steel demand is lowest now in years, dropping rapidly.

US Treasury Bonds pulled back again. The 30-year $USB dropped -0.29% to 129.23. Yield on the 30-, 10- and 5-year Treasuries ended at 3.383%, 2.643%, and 1.651%, respectively.

The $USD weakened -1.12% to 84.56, and the Euro lifted +1.99% to 132.26. The Yen was flat, but the Pound soared +1.59% to 140.06 and the Loonie gained +0.67% to 81.72. The British Pound was sent soaring when Barclays stated they wouldn’t need Bank of England Help.

The lower Dollar was a help to higher precious metal prices. The gold futures ($GOLD) added +$6.20/oz to 903.90, but had been about $5 higher earlier in the day, and then started to sell off a bit more in the morning. This is a crucial level, which if it holds could challenge the 935 level next, but could also back down here to shake traders’ confidence in precious metals.

This Tuesday morning (7:30am ET), the DJIA futures are +32 higher at 8069.

Europe is weaker: French CAC down -1.3%; German DAX -1.2%; and UK FTSE 100 -1.7%.

Crude Oil (March) futures today are a bit lower at 7:30am (compared to yesterday morning), at 46.09 (46.68).

Spot prices for gold, palladium, platinum and silver, at 7:00am (compared to Monday morning) are: 893.30 (907.10), 188 (192), 947 (969), and 11.89 (12.10), respectively.

The $USD, however, has backed off (compared to yesterday morning’s price, to 85.08 (85.815), and the Euro is stronger at 131.61 (129.80).