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Current Futures: Dow -178.00, S&P -21.50, NASDAQ -29.75
U.S. markets declined at a sustainable pace on Thursday after the Non-Farm Payroll showed that the labor market is still struggling.
The global equity markets traded on weak momentum even from the European session, as the major regional indexes were falling close to 2% from the first few hours of trading. This, in turn, sent the S&P futures lower, which were down around 0.8% ahead of the NFP release. As the worse than expected NFP numbers hit the wires, the S&P futures tumbled another 17 points, which made the pair broke below the 900.00 area. Since then, the S&P futures traded relatively flat, but still below the 900.00 area.
Data coming from the labor market continues to disappoint investors, something that made a rather large number of investors switch from the bulls to the bear’s camp. The latest numbers for the month of June showed that the economy lost 467K jobs, while the unemployment rate surged to a 26-year high of 9.5%. At the same time, a report showed that the unemployment claims remain above the 600K benchmark for almost five consecutive months.
The poor labor market has wide implications throughout the U.S. economy. The two biggest problems with a rising unemployment rate are seen in the credit and in the retail markets, both represent major problems for the global economy at this point. Historically speaking, there is a strong relationship between the unemployment rate and the default rate on mortgages, TheLFB-Forex.com Trade Team noted, since jobless persons cannot pay their debt anymore. To add more problems into the mix, the high level of default rates was one of the main problems that led the U.S. economy into the credit crisis. The second problem with a rising unemployment rate is that it cuts spending, since consumers will now be more likely to start saving for their financial safety, and cut unnecessary expenses, such as the discretionary spending.
The Dow Jones Index fell 174.65 points (2.05%) to 8,329.41, while the S&P 500 index declined 21.10 points (2.29%) to 902.23.
Crude oil for July delivery was recently trading at $66.90 per barrel, lower by $2.30. So far on Thursday, the pair declined $3, among the biggest one-day declines of the last few months.
Gold for July delivery was recently trading lower by $10.30 to $931.00. With today’s decline, gold retraced every dollar gained the prior day, on Wednesday.
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