July 13th, 2011 9:43 AM by Mel Samick
Global stocks slid further today due to renewed concerns about the Eurozone's debt crisis and after a dismal jobs report in the U.S. last week rekindled concerns about the recovery in the world's largest economy. Shares in Europe and the U.S. tumbled Friday after Washington announced that the American economy created just 18,000 jobs in June -- a fraction of the figure expected. The downbeat sentiment in the markets was worsened by indications that Europe's debt crisis might be spreading beyond the three countries that have already received rescue packages. There have been mounting concerns that after Greece, Ireland and Portugal, much-larger Spain could need a bailout to manage its tremendous debt load.
U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dampening hopes that the economy was on the cusp of regaining momentum after stumbling in recent months. Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists' expectations of a 90,000 rise. The unemployment rate climbed to 9.2 percent, the highest since December, from 9.1 percent in May. A sign that the labor market is struggling is a major blow for the Obama administration, which has struggled to get the economy to create enough jobs to absorb the 14.1 million unemployed Americans. At the same time, the Federal Reserve, which wrapped up a $600 billion bond-buying program last week designed to spur lending and stimulate growth, appears unlikely to take any further steps to boost the economy. The report also showed that the average workweek fell to 34.3 hours from 34.4 hours. Employers have been reluctant to extend hours because of the uncertainty surrounding the recovery. After trending steadily higher, hours worked by employees fell in June—a signal employers are not only hiring less, but starting to ask current employees to work less because of weak demand. The 34.4 hours worked is the highest since September 2008 and up from a low of 33.7 in June 2009.
Stocks ended lower last Friday following a dismal government employment report, but still closed higher for the second week ahead of the widely-anticipated earnings season. Investors will be looking ahead to second-quarter earnings season. Bank stocks were the biggest laggards, led by Bank of America after the financial giant reached a deal to sell its Balboa Life Insurance unit to Securian Financial. Rivals Citigroup and JPMorgan are slated to report earnings next week. On the tech front, Google declined after Morgan Stanley downgraded the Internet giant's rating to "equal-weight" from "overweight" and cut its price target to $600 from $645.
This will be a busy week for economic news. Alcoa will be reporting its earnings on Monday after the closing bell. FOMC minutes will come out Tuesday. On Wednesday, we will hear from Ben Bernanke as well as get data around weekly mortgage apps and earnings from Yum Brands. PPI, Retail Sales, Jobless Claims, and earnings from JPMorgan and Google will be out on Thursday. CPI and Consumer Sentiment will be released on Friday.
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Information provided by NYSB Capital Markets