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Wednesday, October 6, 2010

September 2010 Jobs Report Creates Stock Market Slump

Jobs Report Weighs On Stocks

ADP reports a surprising loss of 39,000 Jobs in September. Verizon will get the iPhone. Commodity stocks rise on a weaker dollar. Investors cheer 2 GE deals. Citrix sinks.

Stocks were struggling to move higher this afternoon after a report suggested private employment fell in September.

Worse, the ADP National Employment Report said today, "there simply is no momentum in employment." The report is viewed as a hint of what Friday's big jobs report will show.

Apple (AAPL) and Verizon Communications (VZ), meanwhile, reversed declines after The Wall Street Journal said a version of the iPhone will be available to Verizon Wireless customers early next year.

At 3:20 p.m. ET, the Dow Jones industrials ($INDU) were up 2 points to 10,947. The Standard & Poor's 500 Index ($INX) had slipped 3 points to 1,157, and the Nasdaq Composite Index ($COMPX) was down 25 points to 2,374 as technology shares weakened.

Among stocks with sizable moves:

Constellation Brands (STZ), up 4.3% to $18.52, second-best among S&P 500 stocks. The world's largest winemaker said it had second-quarter profit of 52 cents a share excluding one-time items, beating the Street estimate of 49 cents.

Diamond Foods (DMND), down 4.7% to $40.47. The nut processor and distributor said 2011 profit may be as low as $2.38 a share. Wall Street has been looking for $2.45.
Costco Wholesale (COST) up 0.6% to $65.07. The gain came despite slower-than-expected September sales. Massey Energy (MEE), up 5.8% to $33.73. The coal producer was rated "buy" in new coverage by Brean Murray & Co.

Wilmington Trust (WL), down 10.4% to $7.82. The Delaware bank founded by the Du Pont family is seeking a capital infusion from private-equity firms, Bloomberg News said.
Gold settled up $7.40 to $1,347.70, a new closing high, as the dollar fell again.

Silver jumped 31 cents to $23.04 an ounce. Crude oil rose 49 cents to $83.31 a barrel despite a larger-than-expected increase in domestic oil supplies.

Interest rates were lower, with the 10-year Treasury yield falling to 2.399% from 2.474% on Monday.

The market was split, with energy, materials and industrial stocks showing strength as commodity prices moved higher.

Freeport-McMoRan Copper & Gold (FCX) was up 2.6% to $93.24 after hitting a 52-week high of $94.36.

Technology and telecom shares were the weak links.

The market's decline comes after stocks soared Monday, with the Dow jumping 193 points and raising hopes that the blue chips could reach 11,000 again for the first time since May.

The economy looks stagnant

U.S. companies shed 39,000 positions in September after adding 10,000 in August, Automatic Data Processing (ADP) said. Economists had expected to see an increase of 18,000, according to The decline followed seven months of job gains.

The report fueled more speculation that the Federal Reserve will buy more Treasury securities to try to put a floor under the U.S. economy. The dollar was lower in response. Gold, crude oil and other commodities were higher.

While the markets pay attention to the ADP report, it also attracts some skepticism. "Over the last six months, the ADP forecast of private payrolls has undershot the official (Bureau of Labor Statistics) count by an average of 80,000," Nomura economist Zach Pandl wrote this morning. The worst divergence came in April -- 176,000.

He still sees the Labor Department reporting a private-employment gain of 85,000 on Friday.

Meanwhile, planned layoffs rose slightly in September, according to a report by global outplacement consultancy Challenger, Gray & Christmas. During the month, employers announced plans to cut 37,151 jobs, representing a 7% increase from planned reductions in August.

GE cuts a deal, and investors cheer

General Electric (GE) said today it's buying two companies and was spurned in a bid to buy a third.

Investors cheered, pushing the shares up 2.2% to $16.18.

GE said it would acquire privately held Dresser Inc., which makes gas engines used in oil and gas production equipment, for $3 billion.

Its GE Capital finance arm, which had been its weakest point through the recession, had bought $1.6 billion in retail credit assets from Citigroup (C).

But GE also said British oilfield services Wellstream Holdings rejected a $1.2 billion (755 million-pound) takeover approach.

GE has been an active acquirer over most of the past decade, and CEO Jeff Immelt has said the company will focus on deals sized at $1 billion to $3 billion in areas that complement its core industrial and finance franchises.

The company is in the process of selling its NBC Universal media business to No. 1 U.S. cable operator Comcast (CMCSA).

Citrix, Equinix leads techs lower

Shares of Internet-data-center developer Equinix (EQIX) and businss-software developer Citrix Systems (CTXS) were the big weights on tech stocks.

Equinix was down 33% to $70.16 after the company said that third-quarter sales were no more than $330 million, compared with the average analyst estimate of $336.6 million.

Citrix was off 11.3% to $61.89. The sell-off comes after a strong run-up in stock price since early July. The shares had closed at $42.11 on July 2 and recently topped $70 recently after the release of second-quarter earnings at the end of July. Citrix, at the time, reported that it earned 25 cents a share in the quarter.

Citrix was the biggest loser among Nasdaq-100 ($NDX.X) stocks, and only 12 stocks in the index were showing gains. Cisco Systems (CSCO) was the leader, with a 1% gain to $22.21.

The index was down 29 points to $29.04.

Apple (AAPL) was off 1% to $286.38, subtracting 4 points from the Nasdaq-100 by itself. (AMZN) was off 3.5% to $155.29, and Google (GOOG) dropped 1.4% to $530.75.

Semiconductor shares were mostly lower.

Geithner's warning; IMF sees slow U.S. growth

Treasury Secretary Timothy Geithner took aim at China's currency when he warned today that large economies with undervalued exchange rates could create asset bubbles in emerging economies or dismal consumption growth, according to The Wall Street Journal.

The International Monetary Fund said the U.S. economy will grow 2.6% in 2010 and 2.3% in 2011, according to the IMF's World Economic Outlook, which was released Wednesday.

Those forecasts were reduced from July's estimates for growth of 3.3% in 2010 and 2.9% in 2011.

Sources: MSNBC, NY Times, Youtube

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