By Kate Gibson
The latest economic data and corporate layoffs -- including job
cuts at Starbucks Corp. -- has economists hiking forecasts for next
Friday's unemployment count, and are among the factors dragging
down stocks.
The Labor Department on Thursday reported continuing jobless
claims rose by 159,000 last week to a seasonally adjusted 4.78
million, the most since the government began keeping track in
1967.
Separately, the Commerce Department estimated sales of new homes
fell to a record low in December, declining 14.7% to a seasonally
adjusted annual rate of 331,000. .
The reports "confirm what we already worry about, housing is
still on its back and the economy is struggling. Between the
terrible housing report and the ugly jobless claims, there you have
it. The government is laying poor data at our doorsteps," said Jack
Ablin, chief investment officer at Harris Private Bank.
The data, along with disappointing corporate results, hit
equities hard on Thursday, with financials, consumer discretionary
and industrials declining the most. The Dow Jones Industrial
Average (DJI) fell 226.44 points, or 2.7%, to end at 8,149.01.
After a four-session streak of gains, the S&P 500 (SPX)
declined 28.95 points, or 3.3%, to finish at 845.14. The Nasdaq
Composite (RIXF) fell 50.5 points, or 3.2%, to 1,507.84.
Thursday's reports suggest "an ugly economic trajectory with
rapidly deteriorating labor and housing markets as we entered the
first quarter. We expect another big gain in the jobless rate to
7.5% in January, and we assume a 9% peak rate in the third quarter
of 2009," said analysts at Action Economics.
"There's a continual drumbeat of layoff announcements every day.
Everyone is bracing for a bad one," said Ablin of the unemployment
report slated for release next Friday.
The unemployment rate climbed to 7.2% in December as the economy
shed 524,000 jobs, bringing to nearly 2.6 million jobs lost in
2008, with 1.9 million jobs lost in the final four months of the
year. The data were worse than expected, and the ongoing carnage in
employment appeared to be unabated as 2009 progressed.
Allstate Corp. (ALL) and Eastman Kodak Co. (EK) were among those
announcing layoffs on Thursday, with the auto insurer saying it
would slash about 1,000 jobs in its financial unit and Eastman
Kodak planning to hack as many as 4,500 jobs. .
Also hit by the weak economy, Starbucks on Wednesday said it
would shutter another 300 stores, bringing to 977 the count of
expected closures that will result in as many as 6,700 job losses.
.
On Monday, Home Depot Inc. (HD), Pfizer Inc. (PFE) and Sprint
Nextel Corp. (US-S) were among those wielding the ax, resulting in
tens of thousands of layoffs.
Last month's fall of new home sales further blackened hopes for
the embattled housing industry, its troubles adding to labor market
woes.
But Ablin believes the worst in housing is already past, saying
the shutdown in new home construction is part of an improving
picture. "The last thing you want is more supply. I'm in the camp -
maybe of one - that says housing prices stabilize this year.
That'll enable investors to start to warm up to the financial
markets."
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