Stock Futures Plunge Following Weak Jobs Report

By Lu Wang - Apr 9, 2012 5:10 AM GMT+0700

U.S. stock futures fell, signaling more Standard & Poor’s 500 Index losses following the biggest weekly retreat of the year, after American employers added fewer jobs than forecast in March.

S&P 500 (SPX) futures expiring in June slumped 1.3 percent to 1,372.70 at 7:07 a.m. Tokyo time following the benchmark index’s 0.7 percent weekly loss. Dow Jones Industrial Average futures dropped 143 points, or 1.1 percent, to 12,835. Nasdaq-100 Index futures retreated 1.2 percent to 2,721.50. U.S. stock exchanges were shut for Good Friday on April 6, when the employment report was released.

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The S&P 500 fell 0.7 percent last week to close at 1,398.08 on April 5, after reaching the highest level since May 2008 on April 2. Photographer: Scott Eells/Bloomberg

Equities slumped last week after the Federal Reserve signaled it will refrain from further monetary stimulus and concern about Europe intensified. The U.S. Labor Department said April 6 that employers added 120,000 jobs, the fewest in five months and less than the median economist forecast of 205,000 in a Bloomberg survey. The amount had exceeded 200,000 for three straight months.

“This is a real shock,” Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion, said in a telephone interview. “Everybody is so hung up on the 200,000 increase.”

The S&P 500 fell 0.7 percent last week to close at 1,398.08 on April 5, after reaching the highest level since May 2008 on April 2. The Dow Jones Industrial Average lost 151.90 points, or 1.2 percent, to 13,060.14 last week.

Alpha Natural, Apple

Nine out of 10 S&P 500 industries retreated during the holiday-shortened week. Energy companies fell the most as Alpha Natural Resources Inc. (ANR) slumped 6.6 percent, leading the group to a 1.8 percent drop. SanDisk Corp. and Constellation Brands Inc. tumbled at least 8.4 percent after providing disappointing forecasts. Apple Inc. jumped 5.7 percent, helping drive technology companies in the benchmark index to the longest string of weekly gains since at least 1989.

Equities failed to build on the S&P 500’s best first- quarter rally since 1998. Minutes from the March 13 meeting of the Federal Open Market Committee showed that the central bank will refrain from increasing monetary accommodation unless economic expansion falters or prices rise at a rate slower than its 2 percent target. Concern about Europe’s debt crisis intensified as Spain sold 2.59 billion euros ($3.4 billion) of bonds at an auction, less than the maximum target of 3.5 billion euros.

The U.S. jobless rate fell to 8.2 percent, the lowest since January 2009, from 8.3 percent, the Labor Department said. Faster employment growth that leads to bigger wage gains is needed to propel consumer spending that accounts for about 70 percent of the economy. Americans worked fewer hours and earned less on average, helping explain why the Fed says interest rates may need to stay low at least through late 2014.

Pace of Recovery

“What it calls into question and what the debate will be about is, once again, what is the pace of the recovery?” Mark Freeman, who oversees about $13 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a telephone interview.

Fed Chairman Ben S. Bernanke has kept rates near zero since 2008 and expanded the central bank’s balance sheet with two rounds of asset purchases totaling $2.3 trillion. S&P 500 rallies during the first quarter of 2010 and 2011 stalled in April both years, with the index sinking as much as 16 percent and 19 percent, respectively, amid concern the Fed would stop stimulating the economy.

The S&P 500 surged 12 percent from January through March of this year as data on manufacturing, real estate and the labor market boosted optimism about the world’s largest economy. Reports last week showed manufacturing in the U.S. expanded at a faster pace than forecast while jobless claims dropped to the lowest level in four years.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net