The move lower was largely triggered by a weaker than expected jobs report and word that Goldman Sachs had ratcheted down their growth expectations for the economy. U.S. stocks finished well off earlier lows on Friday, leaving intact strong weekly gains, as investors re-assessed news of worse-than-expected job losses in July amid hopes that the Federal Reserve might next week hint at new steps to boost the economy.
The DJIA 10,654, fell 21.42 points, or 0.2%, to end at 10,653.56. The index recovered much of a 160-point morning drop to gain 1.8% during a week of light volumes. Also weighing Friday was a decline in consumer credit amid increased saving by American households. Consumer credit outstanding fell 0.7% in June, while the national savings rate rose to 6.4% from 6.3% in May, the Federal Reserve said in a report late Friday.
U.S. employers cut 131,000 jobs from nonfarm payrolls in July. June payrolls were revised to show 221,000 jobs were lost that month, nearly twice the original estimate. The unemployment rate held steady at 9.5 percent. Economists had expected to see payrolls drop by 65,000 in July and the unemployment rate to rise to 9.6 percent. Jobs in the private sector rose by 71,000, after a 31,000 gain in June, while the government lost 202,000 jobs in July. Economists had expected private-sector jobs to increase by 90,000. Job recovery appears to be a myth. Like I have been stating all along, inorder to creat jobs we need a new revoloution, a new sector, now technology as the “internet age” brought for the 1990′s.
Meanwhile, Goldman Sachs economists cut their forecasts for U.S. economic growth in 2011, saying GDP is likely to average 1.9 percent next year versus a previous forecast of 2.5 percent. Goldman took down their 2010 estimates due heightened concerns of Congressional resistance to do what is necessary in terms of fiscal stimulus. They also expect the jobless rate to rise to 10% in early 2011 and stay there for the rest of that year. Goldman said if the Fed starts reinvesting its money, it would be a “baby step” toward renewed unconventional easing.
Next Tuesday, the Federal Open Market Committee meets to discuss monetary policy. While policy makers are widely expected to hold rates steady, traders will be watching for whether the Fed will resume buying mortgages and Treasurys.
SOURCE: WALL STREET GRAND JOURNAL
