Stocks Higher after Jobs, Inventory Data

Investors weighed news that the U.S. economy lost 240,000 jobs and the unemployment rate jumped to 6.5% in October, and that wholesale inventories fell 0.1% in September .

US stocks moved solidly higher Friday as a weak jobs report failed to prevent a rebound from steep declines earlier in the week.

Some observers argue that Friday's release of the U.S. employment report for October, which showed nonfarm payrolls falling by a greater than expected 240,000 on the month, suggests the U.S. economy is headed toward a deep recession and will force the Federal Reserve to cut rates again.

Traders also eyed a report on September wholesale inventories, which fell 0.1%.

President-elect Barack Obama met with economic transition team members Friday morning and held a news conference.

Regarding the economic crisis, Obama said, "I do not underestimate the enormity of the task that lies ahead." He added: "Immediately after I become president I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity."

Obama, who takes office Jan. 20, made clear that "the United States has only one government and one president at a time."

European stocks were higher, with major indexes in London, Frankfurt, and Paris each posting gains. Asian markets finished mixed, with Tokyo stocks down 3.55%, Hong Kong up 3.29%, and Shanghai higher by 1.75%.

On Friday, the Dow Jones industrial average finished higher by 248.02 points, or 2.85%, to 8,943.81. The broader S&P 500 index added 26.11 points, or 2.89%, to 930.99. The tech-heavy Nasdaq composite index gained 38.7 points, or 2.41%, to 1,647.40.

On the New York Stock Exchange, 21 stocks were higher for every nine that declined. The ratio on the Nasdaq was 17-10 positive. Trading was slow, which "suggests Wall Street [is] not convinced the market has reached bottom," says S&P MarketScope.

Friday's gains followed two steep declines on Wednesday and Thursday. The Dow shed 4.85% Thursday after a 5.05% loss Wednesday. The broader S&P 500 index lost 5.03% Thursday following Wednesday's 5.27% decline. The tech-heavy Nasdaq composite index fell 5.53% and 4.34% on Wednesday and Thursday respectively.

U.S. nonfarm payrolls plunged 240,000 in October. The headline figure was below market expectations for a 190,000 drop. However, Wednesday's ADP private payrolls report added downside risk. Moreover, this comes after a big downward net revision of -179,000 the two months prior (September was revised to -284,000 from -159,000, and August was revised to -127,000 from -73,000). The unemployment rate jumped to 6.5% in October from 6.1% in September, which is the highest since March 1994. Average hourly earnings rose 0.2%, the same as in September. The workweek held at 33.6 hours. Goods producing jobs were down 132,000, with construction down 49,000, and manufacturing down 90,000. Service providing jobs lost 108,000. Only health services, mining and the government posted gains.

U.S. wholesale sales fell 1.5% in September, after a revised 1.6% decline in August (-1.0% previously). Inventories dipped 0.1% after rising 0.6% in August (0.8% previously). Petroleum sales declined 3.6%; excluding petroleum, sales were still down 1.1%. Inventories excluding petroleum rose 0.1%. The inventory-sales ratio inched up to 1.12 from 1.10 in August; it was a lean 1.06 in June.

Atlanta Fed President Lockhart spoke on the U.S. economy Friday, warning of trouble ahead. "I foresee substantial weakness at least through the first half of 2009. This weakness will exacerbate the employment picture, he said. Market conditions may have eased recently, but it's too early to declare the financial crisis over, he said.

Reuters reported European leaders will propose a new global financial framework after the IMF warned the world's richest economies face their first year of contraction since World War II. South Korea lowered interest rates by 25 basis points, its third cut in a month, after a deep rate cut by Britain and one by the European Central Bank on Thursday. Central banks around the world have stopped worrying about inflation and are reducing borrowing costs to try to prevent the global financial crisis from turning into a deep downturn.

There was more troubling news from the U.S. auto sector Friday. General Motors (GM) reported a third quarter loss of $7.43 a share, with a $2.8 billion loss for the automotive unit and a $1.7 billion loss for GMAC. GM anticipates weakness through 2009 as the slowdown spreads around the globe, with liquidity also in jeopardy, draining cash at a rate which will approach the minimum to sustain the business even if preventative actions on its liquidity are implemented.

Ford Motor Co. (F) posted a deeper-than-expected $2.98 billion quarterly operating loss and told investors it would take aggressive actions to further cut costs as it faces a severe slump in demand. Weak demand for autos is being felt around the world. Ford said it depleted its cash by $7.7 billion -- almost 30% -- during the quarter as it had to pay costs related to production cuts and make upfront payments to Ford Credit in an effort to spur consumers to buy automobiles. Ford told investors that it would look to cut salary expenses by 10%, a move that follows a 15% cut earlier this year.

Dire problems in the auto sector are landing squarely in the lap of the President-elect, with remedies mulled from cash infusions from TARP and government stakeholding to outright bankruptcy filings and/or mergers, says Action Economics.

According to a newswire report, Microsoft (MSFT) dismissed speculation that it might still be interested in a takeover of Yahoo (YHOO). "We made an offer, we made another offer... We have moved on," Micfrosoft CEO Steve Balmer reportedly said.

Walt Disney Co. (DIS) posted lower-than-expected fiscal fourth quarter EPS of 43 cents, vs. 42 cents one year earlier (both excluding items), on a 6% revenue rise. The company noted the higher cost of labor and other items. Wall Street Street was looking for EPS of 49 cents.

Genworth Financial (GNW) reported third quarter net operating EPS of 51 cents, vs. 83 cents one year earlier, on a 25% total revenue decline. The company suspended its quarterly dividend. It also suspends 2008 earnings guidance. Genworth says it is evaluating several additional capital flexibility alternatives, including potential asset sales.

Source: http://www.businessweek.com/investor/content/nov2008/pi2008117_295307.htm?chan=top+news_top+news+index+-+temp_investing