U.S. markets tumbled on Friday on a
weaker-than-expected jobs report, and weak economic data from the
euro zone. On Friday, the S&P 500 dropped 22.47 points or 1.61%
to 1,369.10. The Dow tumbled 168.32 points or 1.27% to 13,038.27.
For the week, the S&P 500 fell 2.4%, for its worst weekly
performance in 2012.
Disappointing April Jobs Report
The jobs data responsible for Friday's
market tumble was the U.S. April jobs report, which showed a gain of
only 115,000 jobs. It was 55,000 less than the 170,000 jobs that
economists expected. In addition, job gains decreased for the third
month in a row. Even though the unemployment rate fell to 8.1%, it
was due to 342,000 people giving up looking for work.
Euro Zone PMI Disappoints
On Friday, the Eurozone Services PMI
from Markit showed a reading of 46.9 in April, which was
significantly lower than the 49.2 in March. It indicated a deeper
recession for the euro zone. In addition, France and Greece were
heading into elections in the weekend, which added to the uncertainty
in the markets.
Yields on Spanish Debt Remains
Elevated
On Thursday, 3-year Spanish debt was
auctioned at 4.037%, much higher than the 2.89% in the previous
auction. Meanwhile, 5-year debt was auctioned between 4.752% and
4.960%, higher than the 4.319% previously.
ADP Shows Weak Private-Sector Hiring
On Wednesday, the ADP jobs report
alluded to the disappointing April jobs numbers. The ADP report
showed a gain of only 119,000 private-sector positions, much lower
than the 177,000 the market expected. In addition, U.S. factory
orders in March fell 1.5%, its biggest fall in 3 years. This caused
the U.S. markets to open lower on Wednesday.
ISM Data Better Than Expected
Not all economic data this week was
weaker-than-expected. On Tuesday, the April ISM reading was 54.8,
better than the 53 the market expected. As a result, the Dow rose
almost 100 points in early trading.
Looking Ahead to Next Week
Investors will be watching data from
China next week, when the country releases inflation, retail and
factory numbers. In addition, investors will pay attention to March
readings on industrial output in Germany, France, Italy and Spain for
a measure of how deep the euro zone recession will be.
Sunday's election defeat of Nicolas
Sarkozy in France and the ruling parties in Greece will cause
investors to become concerned about how determined the euro zone is
in carrying out austerity measures. These election defeats will add
to the uncertainty in the markets. With the disappointing jobs data
from Friday continuing to weigh on markets, stocks will likely head
lower in the beginning of next week. With earnings season winding
down, investors will turn their focus back to the euro zone. With
uncertainty in the euro zone increasing and what appears to be a
deeper recession, U.S. markets will likely head lower next week.
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