09:45AM Wall Street plunged at opening, pressured by employment decline.
Wall Street opened sharply down Friday, reflecting a heavy sell-off after the government reported employment in August fell for the first time in four years rather than rising as economists had been expecting. The Labor Department said U.S. nonfarm payrolls fell an estimated 4,000 in August, while the unemployment rate held steady at 4.6%. Following the jobs report the dollar fell sharply, while bonds surged. The three major averages dropped more than 1%.
Major financial stocks moved sharply lower. Shares of investment banks Morgan Stanley (
MS: chart) fell 1.9%, Merrill Lynch (
MER: chart) lost 1.7%, while Lehman Brothers (
LEH: chart) dropped 3%.
Among companies in focus, Harley-Davidson (
HOG: chart) fell 9% after the motorcycle maker cut its forecast for Q3 shipments and full-year earnings. In earnings-related news, Hovnanian (
HOV: chart) fell 2.9% after the home builder posted Q3 losses of $77.9 million. Another home builder Beazer Homes (
BZH: chart) dropped 9% asa it had received purported default notices from U.S. Bank National Association, the trustee under the indentures governing several outstanding senior notes.
Of other notable movers Bear Stearns (
BSC: chart) fell 3% after Banc of America Securities downgraded its stock to neutral from buy, citing weaker fixed-income trends. Wyeth (
WYE: chart) fell 3.5% following a federal court decision denying its attempt to prevent Teva Pharmaceutical Industries (
TEVA: chart) from launching a generic version of the drug Protonix.
In the first minutes of trading, the Dow fell 151.77, or 1.14%, to 13,211.58. The Standard & Poor's 500 index fell 18.72, or 1.27%, to 1,459.83, and the Nasdaq composite index fell 39.17, or 1.50%, to 2,575.15. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell to 4.42% from 4.51% late Thursday.
09:00AM U.S. stock futures dropped after the Labor Department said employment contracted in August.
U.S. stock futures moved steeply lower Friday, pressured by weak employment report and comments from ex Fed Reserve Chairman Alan Greenspan who said the current market situation is similar to the stock-market crash of 1987 and 1998. Some investors believe that the report will exert pressure on Federal Reserve officials to reduce interest rates at its policy meeting on Sept. 18.
The Labor Department said that employment in August declined for the first time since August 2003. Nonfarm payrolls contracted by 4,000 in August. The decline was much weaker than the 115,000 increase expected by economists. The unemployment rate held steady at 4.6%. Average hourly earnings rose 5 cents, or 0.3% to $17.50.
Profit warning from Harley-Davidson (
HOG: chart) further weighed sentiment down. Company''s shares fell 6.5% in pre-open trade after it released a profit warning and cut its motorcycle shipment outlook. Harley-Davidson predicted a net income decline of 4% to 6% in 2007. As further proof of struggling housing market, luxury home builder Hovnanian (
HOV: chart) reported a $77.9 million loss on a 27% revenue drop.
In other corporate news, Pozen (
POZN: chart) surged 10% after it in partnership with AstraZeneca (
AZN: chart) took a drug into Phase III development. S&P 500 futures dropped 10.6 points at 1,469.00 and Nasdaq 100 futures fell 13.75 points at 1,990.00. Futures on the Dow Jones Industrial Average dropped 75 points.
Nonfarm payrolls dropped 4,000 in August.
In a major surprise to economists, U.S. employment showed a modest decrease in the month of August, according to a report from the Department of Labor on Friday. The report is likely to solidify expectations that the Federal Reserve will cut interest rates later this month. The report showed that
non-farm payrolls fell by 4,000 jobs in August following a downwardly revised increase of 68,000 in July. Economists had expected an increase of about 110,000 jobs compared to the increase of 92,000 originally reported for the previous month. Although many economists had tempered their outlook for the August employment report following recent weak data, the drop in employment still came as a big surprise.
The unexpected decrease came as a drop in jobs in the goods-producing sector more than offset an increase in jobs in the service-providing sector. The report showed that employment in the goods-producing sector fell by 64,000 jobs, reflecting a decrease of 22,000 construction jobs and a decrease of 42,000 manufacturing jobs. At the same time, the service-providing sector added 60,000 jobs due in large part to an increase of 63,000 education and health services jobs. A decrease of 28,000 government jobs partly offset the increase in service sector jobs. Despite the drop in employment the unemployment rate remained at 4.6 percent in August, unchanged from the previous month and in line with economist estimates. The Labor Department also noted that average hourly earnings edged up $0.05 or 0.3 percent in August to $17.50. With the increase, average hourly earnings are up 3.9 percent compared to the same month last year.
8:15AM Hovnanian reported another loss in Q3, due to continuous credit markets troubles and high inventory.
Hovnanian Enterprises Inc. (
HOV: chart) reported another loss in Q3, citing continuous credit markets troubles and high inventory. The homebuilder posted wider-than-expected loss of $77.9 million, or $1.27 a share compared with a profit of $77 million, or $1.15 a share a year earlier. Company’s revenue for the quarter dropped 27% to $1.13 billion from $1.55 billion last year. Analysts had expected a per-share loss of 99 cents and revenue of $1.13 billion.
The quarterly results include $108.6 million in land-impairment and write-off charges. Hovnanian''s cancellation rate rose to 35% during Q3, up from 32% in Q2. Excluding unconsolidated joint ventures, the company delivered 3,179 homes in the quarter, compared with 4,623 in the year-ago period. The disappointing financial results released by the luxury homebuilder sounded perfectly adequate against the background of a struggling housing market.
