Morning Watch, Feb. 5
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February 5, 2010
Selling continues as traders digest another disappointing jobs report. On Thursday, the major market indices fell sharply on concerns about the global economy, notably the debt problems in Europe. Declines Friday haven't been near as heavy, but the Dow (DJI) has still broken below the key 10,000 level.
Nonfarm payrolls for January fell by 20,000 when estimates were for a flat to slightly positive reading. Adding insult to injury was the 65,000 job losses added to December's figure. Yes, the unemployment rate did fall 3-tenths to 9.7 percent, but this was a result of job hunters giving up their search for employment. One positive in the report was the gain of 11,000 payrolls in the manufacturing sector, although construction continued to slack, losing 75,000 payrolls. Compared with the year ago period, payrolls are down 3.0 percent, which was an improvement from the 3.6 percent drop seen in December.
Concerns about debt issues in Greece, Spain and Portugal continue to take a toll on global markets. The worry is that these countries' problems are going to spread to the entire euro zone and possible back to the U.S. These issues, along with a slower than anticipated recovery for the U.S. jobs market has left traders in a selling mood with many analysts saying a correction is underway. The Dow has fallen more than 7 percent from its closing high on January 19. At the same time, support at 10,000 is in jeopardy. The definition of a correction is a 10 percent decline and this is definitely a possibility.
In merger news, Air Products (APD) had begun a hostile bid for its rival Airgas (ARG). The purchase price is $60 a share, which is a 38 percent premium to Thursday's close for ARG. ARG shares are up nearly 40 percent to $60.92. The deal is valued near $7 billion including assumed debt. Obviously, traders feel a higher offer will be forthcoming given the stock trading above the bid price.
In earnings news, home builder Beazer (BZH) easily beat estimates, sending the stock higher in early trading. BZH made $1.17 a share when a decline of 90-cents a share was expected. Revenues also exceeded estimates by nearly $18 million. The stock is up more than 3 percent at a price near $4.25. Tyson Foods (TSN) also blew past estimates, sending the stock higher by more than 6 percent. TSN made 42-cents a share, 24-cents above expectations.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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