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Whoosh. Markets are caught in a downdraft this morning after the Federal Reserve said to banks craving another taste of quantitative easing: "No soup for you!" Policymakers apparently believe the economy has reached an escape velocity from the liquidity trap. However, today's lackluster jobs report calls that logic into question. According to ADP, the U.S. added 209,000 jobs, which came in 8,000 under expectations and a whopping 21,000 fewer than last month. The official government numbers come out on Friday, but because of the holiday weekend, the market won't be able to digest the new info until Monday.
With that in mind, let's take a closer look at how the major indexes are faring so far today and drill down on a few stocks making moves.
|Dow Jones Industrial Average (INDEX: ^DJI )||(166.35)||(1.26%)||13,033.20|
Source: Yahoo! Finance.
The lack of additional stimulus has hit commodities and bank stocks like a ton of bricks. Dow components Bank of America (NYSE: BAC ) and JPMorgan Chase (NYSE: JPM ) both declined nearly 3% in early trading and the Direxion Daily Financial Bull 3X (NYSE: FAS ) ultra-long ETF plunged 5.5% as its leverage works against investors. Easy money has fueled the banking resurgence from what could have been an industry death spiral just a few years ago. Gold, oil, and the rest of the commodities were down as the U.S. dollar gained strength. Unsurprisingly, companies whose bottom line depends on high commodity prices are down, including aluminum heavyweight Alcoa (NYSE: AA ) , with shares off 2.5%. As the first Dow component to report earnings, Alcoa gets a big spotlight, but investors will want to dig into management's guidance on April 10 for firsthand insight into the global recovery.
Investors should remember a return to normal policies was inevitable, and if the recovery falters, the Fed would likely intervene. In the meantime, financials will have to work a little harder to generate their return, and in commodities, companies with low extraction costs generally give the largest margin of safety.
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