Employment Situation Disappoints Investors, Slows Dow's Momentum

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After finishing at a new record high, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is starting off the day a bit slower. As of 11:45 a.m. EDT, the index is down 29 points, with 16 of its 30 components in the red. But today was the day most investors have been anticipating in terms of new economic news, The Labor Department released its Employment Situation report, and so far, investors seem nonplussed by the mixed information.

Economy seeks qualified new hiring for immediate start 
The situation report showed a slowing of hiring for the month of July
and newly revised counts for May and June, which both went down from the previously reported numbers. With only 162,000 new jobs added during the month, July's activity was a huge miss based on estimates in the mid-180,000s.

Though new hiring was slowed, the official unemployment rate dropped 0.2 during July to 7.4% -- the lowest rate since December 2008. While this might appear to be a good indicator of the labor market's continued improvements, the decline is in large part due to a drop in the number of people participating in the labor market.

Needless to say, investors are not exactly sure how to react to this morning's report. While the lower unemployment rate and other jobs data released earlier this week are headed in the right direction for the Fed's criteria for ending its stimulus policy, other aspects of the data make the current labor market conditions much more complex than the numbers imply.

Financials falling
After a great day yesterday, the Dow's financial components are taking a breather today as well. Investors may now be weighing the implications of new restrictions on debit card transaction fees and how the firms will replace lost revenue without causing their customers to revolt. Bank of America (NYSE: BAC  ) is under pressure from a slew of regulators looking to file suits against the bank for several jumbo-size mortgage-backed securities. The U.S. Justice Department, Securities and Exchange Commission, and the New York Attorney General's office are all in line to file civil suits against the bank. Both the Countrywide and Merrill Lynch divisions of B of A are in question in the proposed suits.

With the employment data not providing a clear picture for investors, consumer-spending dependent American Express (NYSE: AXP  ) may have a hard time staying near breakeven today. Combined with the transaction fees issue, a muddled picture of the current jobs market may make investors weary about how the financial firm will continue to drive revenue growth. To this point, AmEx has been largely successful due to its concentration on higher-income demographics.

Outside the Dow, American International Group (NYSE: AIG  ) is soaring this morning following analyst-estimate-beating earnings as well as a newly reinstated dividend and share buyback plan. Though governmental ownership ended in the fourth quarter of last year, the company had not reinstated its dividend or made plans to repurchase shares in order to put other company goals first. The main goal of reducing its debt burden was a key to AIG's new $0.10 per share dividend and $1 billion share repurchase plan.

AIG may have been the Wall Street pariah following the financial crisis, but many investors are still terrified about investing in big banking stocks after the crash. The sector does have one notable standout that could give these investors enough confidence to welcome banks back into their portfolios. In a sea of mismanaged and dangerous peers, it rises above the rest as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

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9/30/2016 2:43 PM
^DJI $18343.77 Up +200.32 +1.10%
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