Rising Unemployment = Dow Catastrophe

After weeks of hand-wringing over the eurozone's crawl to the precipice, it was almost refreshing that today's broad market sell-off is about one concretely domestic issue: unemployment. Data released this morning had no silver linings, except maybe that we aren't losing jobs on an absolute basis. Only 69,000 jobs were created, far less than the 155,000 predicted, as the manufacturing work week fell and the prior two reports were revised down as the unemployment rate ticked up to 8.2%.

As if his former stewardship didn't do enough damage to the economy already, Alan Greenspan refuses to go away graciously took time to appear on CNBC warning of bond markets turning against U.S. debt and high interest rates. Does Greenspan bother to look at data before cowering before imaginary bond vigilantes? Right now the U.S. Treasury real yield curve rates on five-year, seven-year, and 10 year TIPS are negative. Don't believe me? Look for yourself.

And more importantly, with the euro potentially unraveling, where will investors turn to put excess liquidity outside U.S. debt? Japan, with its even worse debt issues? Communist China? And if inflation is your fear, remember that it's hard to get inflation without rising wages, and it's hard to get rising wages when unemployment is over 8% because of budget cuts and weak consumer spending. Greenspan's dedication to dogma despite clear evidence to the contrary cements his folly.

That said, let's take a closer look at the three major indexes and drill down on a few stocks caught up in the action.

Index

Gain / Loss

Gain / Loss %

Ending Value

Dow Jones Industrial Average (INDEX: ^DJI  ) (274.88) (2.22%) 12,118.57
Nasdaq (79.86) (2.82%) 2,747.48
S&P 500 (32.29) (2.46%) 1,278.04

Source: Yahoo! Finance.

It's a bloodbath, as all three major indexes are trading sharply lower. The Dow, now negative for the year, is holding up marginally better, even as all 30 components are in the red. Embattled tech giant Hewlett-Packard is down more than 6% while financials Bank of America and American Express also saw sizeable declines, shedding more than 4% of their value.

About the only stocks trading higher are in the precious-metals business, which isn't surprising as investors are fleeing for safety and concerns remain over the euro's sustainability. Agnico-Eagle (NYSE: AEM  ) popped 8%, as did silver mine Coeur d'Alene (NYSE: CDE  ) . On the other side of the commodity trade, energy prices are plummeting in the face of another potential global slowdown/ Oil is now down to $83 dollars a barrel, and hopeful liquefied natural gas exporter Cheniere Energy (AMEX: LNG  ) is down more than 10%.

In other news, Liberty Media plans to assert control of Sirius XM (Nasdaq: SIRI  ) despite CEO Mel Karmazin's successful turnaround. Official proclamations of support aside, concerns remain over everyone's ability to work together, and the issue could come to a head when Karmazin's contract runs out at the end of the year. Liberty may also be interested in splitting off the satellite-radio service, so Sirius investors need to watch these developments carefully.

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David Williamson holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended creating a write covered strangle position in American Express. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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