Stock futures crumble on jobs
Nasdaq, S&P seen opening sharply lower after weaker-than-expected December employment.
NEW YORK†(CNNMoney.com) -- The outlook for stocks turned sour Friday after a government report showed that jobs grew much less than expected last month.
Futures plummeted after 8:30 a.m. ET, when the Labor Department released its December report.
The report showed that payrolls increased by only 18,000 last month. Economists surveyed by Briefing.com had forecast the report would show that employers added only 70,000 jobs in the month, down from a 94,000 increase in November.
The unemployment rate jumped to 5 percent, up from 4.7 percent, which is a 17-month high. Since 18,000 new jobs is not enough job growth to keep up with increases in the labor pool, economists had forecast the unemployment rate would rise to only 4.8 percent.
Some economists had warned that the report could come in weaker, perhaps even showing a drop in Americans with jobs - especially since the government collected information from employers during a week when much of the country was hit by severe winter weather.
Economist John Silvia said after the release that the weak report could cause a sell-off in stocks.
"Equity investors are looking at earnings expectations that are certainly less than [before the report came out]," he said. "Expect a tough economy in terms of economic growth."
"Also, credit quality will be questioned due to a weaker economy," Silvia added. "Expect Treasurys to go up, as this is a negative report for financial markets."
Silva said that the Federal Reserve may not be able to provide much help any time soon.
"Inflation data suggests the Fed is still hampered in terms of easing," Silva said, "Expect the Fed to cut rates by the 25 (basis point, or quarter percentage point) mark, not the 50 mark that investors hoped for."
Silvia said he also thinks results of the Iowa Caucus, with victories by Democrat Barack Obama and Republican Mike Huckabee are probably weighing on stock futures, although the impact on trading Friday will pale in comparison to the jobs report.
"Both Obama and Huckabee are unconventional, populist candidates," said Silvia. "It just creates a lot more uncertainty, which the markets don't like."
The jobs report comes amid growing anxiety about the threat of a U.S. recession that has been fueled by surging oil prices. Oil futures reached $100 a barrel for the first time Wednesday and crossed that milestone during the trading session on Thursday, although once again it retreated below that benchmark before the close.
In early electronic trading Friday, crude prices remained near $99 a barrel, with a barrel of light sweet crude trading down 31 cents at $98.87 a barrel.
Jitters about the U.S. slowdown and weak auto sales reported Thursday hammered stocks in Japan, where the benchmark Nikkei sank 4 percent as traders returned from an extended holiday. European stocks got off to a positive start.
Stocks to watch Friday include Dow component Boeing (BA, Fortune 500), which reported late Thursday that commercial jet orders soared 35 percent in 2007 to 1,413, supported by demand for its new 787 aircraft, which saw orders more than doubled to 369 from 157 a year earlier.
But Scott Carson, the head of Boeing's commercial aircraft until told in-house publication Boeing Frontiers that he didn't believe the company would be able to have a fourth straight year of orders above 1,000 in 2008, citing the toll higher fuel prices will take on its airline customers.
Home furnishings and housewares retailer Bed Bath & Beyond (BBBY, Fortune 500) announced after the close Thursday that current quarter profit would miss Wall Street estimates and forecast sales at its stores open at least a year would be flat in the period. Shares plunged 6.6 percent in after-hours trading following the announcement.
General Motors (GM, Fortune 500) CEO Rick Wagoner said in an online chat Thursday that the company is still pushing to get its ambitious plug-in hybrid vehicle, the Volt, into production by 2010. But despite what he called "massive resources" being put into development, the company "can't guarantee that at this time," he said.
The Volt is designed to run solely on a rechargeable lithium-ion battery now in development for most trips. GM, which saw 2007 sales fall 6 percent in the face of higher fuel prices, has already started heralding the Volt in advertising campaigns, even though it is not yet available.
Also in the news Friday is Spark Networks (LOV), parent company of the popular dating site JDate.com, which has put itself up for sale, according to a report in the New York Times.