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Weak Jobs Number Sends Homebuilders Higher

By Matt Thalman – Jan 10, 2014 at 1:00PM

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The Dow and other major indexes stumble after the weaker-than-expected jobs report, but some businesses are benefiting from this information.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Investors spent the week waiting eagerly for the U.S. Labor Department's latest nonfarm payroll report, which most economists estimated would show 200,000 jobs created in December. But the release this morning indicated that only 74,000 new jobs had been created last month. To make things worse, the labor force participation rate fell from 63% in November to 62.8% in December, which played a part in pushing the unemployment rate down to 6.7%, from its previous 7% resting spot.  

This worse-than-expected news has caused rising negative sentiments throughout the markets, and as of 1:05 p.m. EST the Dow Jones Industrial Average (^DJI -0.38%) is down 40 points, or 0.24%, while the S&P 500 and Nasdaq are both down 0.08.

The Dow's biggest loser at this time is Chevron (CVX 0.26%) which is off by 1.9%. The drop comes after the oil and gas giant released an interim update on its fourth-quarter earnings. Management expects earnings to be comparable to the year-ago quarter, as U.S. net oil-equivalent production is slightly lower, but has been offset by higher natural gas prices domestically. The company has been dealing with asset price fluctuations all quarter, both here at home and internationally, and those changes may end up hurting the company's profits this quarter.  

Outside the Dow, homebuilders are rallying today, as DR Horton (DHI -3.37%) is up 2.6%, Lennar (LEN -3.03%) is up 2.6%, and PulteGroup (PHM -2.44%) is up 2%. These moves higher are likely due to the weak jobs data released this morning.The Federal Reserve has made it clear that it will base part of its decision to slow its asset purchasing program and let interest rates rise on strengthening jobs numbers. Additionally, the data released today pushed U.S. Treasury yields lower, with the 10-year falling from 2.97% to 2.88% and the 30-year down from 3.88% to 3.81%. This lowering of the Treasury yield will also help homebuilders by pushing mortgage rates lower, making it more affordable for American's to buy homes.  

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Fool contributor Matt Thalman has no position in any stocks mentioned. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513

The Motley Fool recommends Chevron. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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