Jobs Report Kills the Market’s Hopes

Continuing a disconcerting trend, the S&P 500 (INDEX: ^GSPC  ) index fell  0.94% following this morning’s non-farm payroll report, and signs that the European debt crisis is reemerging following last week’s positive EU Summit announcement. According to Bespoke Investment Group, the drop marks the fourth month in a row of declines over 1% on the day of the payrolls report, a feat not seen since April 2001. The reason behind the fall was payroll growth of 80,000, lower than expectations for 100,000. The nation’s unemployment rate remained constant at 8.2%, consistent with estimates. Ironically, it likely isn’t the magnitude of the miss that hurt markets today but, rather, the logic that this month’s numbers aren’t bad enough!

Say what!? You see, many observers think that these numbers fall short of pressuring the Federal Reserve to consider additional easing actions during their next meeting. As we’ve seen in the past, stimulus has had a positive impact on stock prices, and today’s trading reflects little hope for that kind of boost. Rather, today’s results (below) suggest that the economy will continue to trudge along at a sluggish pace, absent any near term Fed support.

Index

Gain / Loss

Gain / Loss %

Value

Dow Jones Industrial Average (INDEX: ^DJI  )

(124.2)

(0.96%)

12,772

Nasdaq

(38.8)

(1.30%)

2,937

S&P 500

(12.9)

(0.94%)

1,355

Source: Yahoo! Finance

Within the Dow, the two best performing stocks were Wal-Mart and McDonald’s (NYSE: MCD  ) , both up about 0.4% in a day where 25 of the 30 Dow components finished lower. Both companies are considered by many to be the most defensive of their kind, reflected in their performance relative to the broader stock market during the last recession.

Outside of the Dow, shares of S&P 500 index newcomer Seagate (Nasdaq: STX  ) fell 0.5% following yesterday’s surprise announcement  lowering expected revenue and margins for the quarter. When a company preannounces results, it’s typically either a really good or really bad sign; however, in this instance, the reaction was largely benign. While the company admitted that it didn’t hit its planned market share numbers last quarter, a one-off "isolated supplier issue" that impacted shipments by 1.5 million may have helped to cushion the blow. Given that the hard drive industry is largely dominated by only a few companies, Seagate’s market share shortfall was considered good news for competitor Western Digital (Nasdaq: WDC  ) , which  saw shares rise 1.1% on the day.

Another reason why Seagate may not have fallen all that much is the fact that they are one of few dominant players in the market they serve. The same holds true for the companies outlined in our special free report entitled: “The 3 Dow Stocks Dividend Investors Need.” In it, we outline companies dominating their respective markets and paying strong, sustainable dividends to boot. To access this report, completely free of charge, click here now.

Brenton Flynn now owns shares in the companies mentioned. The Motley Fool owns shares of McDonald's Corporation and Western Digital. Motley Fool newsletter services have recommended buying shares of McDonald's Corporation . Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools may not 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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