Jobless Report Expected To Weigh On The Stock Market

Jan. 30, 2010 - PRLog -- Forget the stock market's loss for the week.

It's the longer trend investors should watch, especially in the week ahead with a number of important earnings reports and Friday's big unemployment report. Here's why.

Yes, the stock market had a crummy week. The Dow Jones industrials, down 53 points on Friday to 10,067, were off 1% for the week, with the Standard & Poor's 500 Index down 1.6% and the Nasdaq Composite Index off 2.6%.

•Check today's currency rates
But let's look at the longer trend. The market has had three crummy weeks in a row. January was the worst month for the major averages since February 2009 when the Dow, S&P 500 and Nasdaq fell 7%. Semiconductor stocks fell 10% in January. Metals stocks were worse; Alcoa (AA) was down 21%.

The Dow and S&P 500 are off 6.2% and 6.7%, respectively, since peaking on Jan. 19. The Nasdaq is off 8.5% since peaking on Jan. 14. All three have broken below their 50-day moving averages. That's a clear signal that investor confidence has been shaken at least in the short term.

A number of investors were worried enough to want to own U.S. Treasury securities. Result: Yields fell, and the dollar rose to levels last seen in October.

Goldman Sachs (GS) is off 23% since peaking in October and Apple (AAPL) is down nearly 11% since peaking on Jan. 5.

While the big rally since March clearly was showing signs of exhaustion by early December, the market peaked on Jan. 19 just before President Obama's Jan. 21 call to limit the size of the largest banks.

Since Jan. 19, the Dow has fallen 6.2%. The S&P 500 is off 6.7%. The Nasdaq's peak came on Jan. 14; it has fallen 7.5% since.

So why the fall? Three reasons:

•Stocks of big banks have taken a beating from the president's bank proposal. (Ironically, regional banks, because they don't have big trading operations, were among the month's biggest winners.)

•The signs of recovery that were all over the place in November seemed to dissipate in December and January. U.S. unemployment is still at 10%, and everyone from the Obama administration and Congress to banks, homebuilders  and automakers wants to get that rate down as fast as possible. My colleague Jim Jubak thinks the recession has damaged consumer demand for years to come.

•China's growth -- source of much of the excitement for stocks over the last year -- looks like it may slow. The Chinese government is very nervous about bubbles building in real estate and has told banks to slow lending or stop altogether. By Charley Blaine, MSN.com
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