Jobs Report, Earnings Sink Stocks
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U.S. stocks fell last week, extending declines after the worst month in 21 years, as jobs and profit data stoked concern that President-elect Barack Obama will inherit an economy deep in a recession.
The Standard & Poor's 500-stock index had its biggest two-day slide since 1987 before paring the drop Friday on speculation that the Federal Reserve will lower interest rates. General Motors lost a quarter of its value and said it may run out of cash this year.
The S&P 500 lost 3.9 percent, to 930.99, for the week. The Dow Jones industrial average retreated 4.1 percent, to 8943.81. The Russell 2000 Index of small-company stocks fell 5.9 percent, to 505.79. The Nasdaq composite index fell 4.3 percent, to 1647.40.
"The election is over, and now it's back towards looking at traditional drivers of the market, things like the economy and earnings," said Leo Grohowski, chief investment officer for the wealth management unit of Bank of New York Mellon.
The Labor Department said Friday that the U.S. jobless rate climbed last month to 6.5 percent, the highest since 1994, as payrolls dropped by 240,000. The leader of a National Bureau of Economic Research panel that dates economic cycles said that now there is no doubt that a recession is under way.
S&P 500 companies are poised for a fifth consecutive quarter of falling earnings, the longest streak since the 2001 recession. Profits fell by 13 percent for the 442 companies in the index that have reported third-quarter results.
GM tumbled 25 percent for the Dow average's biggest loss. The largest U.S. automaker said it will fall "significantly short" of the amount of cash needed by the end of June unless the auto market improves or it raises capital. The company reported a $4.2 billion operating loss for the third quarter.
Macy's slid 11 percent, and Target lost 9 percent after reporting October sales declines as accelerating job losses discouraged consumer spending heading into the holiday-shopping season.
The Treasury will auction $27 billion of three-month bills and $27 billion of six-month bills on Monday. They yielded 0.38 percent and 0.95 percent, respectively, in when-issued trading. Also Monday, the government will sell $25 billion in three-year notes in the first monthly auction since May 2007. One-month bills will be sold Wednesday.
-- Bloomberg News
