News and economic data were mostly negative this week -- the unemployment rate surged to a 16 year high, December retail sales were awful, and several major companies issued earnings warnings -- resulting in sharp losses for the major indices.
In terms of economic reports, the ADP report Wednesday, which measures private nonfarm employment, foreshadowed the government's report on Friday. According to ADP, private employers slashed 693,000 jobs in December, which was much worse than the expected drop of 495,000 and reflects a very weak labor market.
The December nonfarm payrolls reading Friday confirmed the ADP report, showing a drop of 524,000 jobs. This matched the 525,000 decline as forecast by economists, which was revised downward following the ADP reading. The total workweek fell 0.2 hours to 33.3. This is not a good sign for future employment trends, as employers tend to cut hours before workers.
The unemployment rate jumped to 7.2% from 6.8% in part because of a drop in employed, but was also boosted by a surprising drop in the labor force. The employment numbers confirm an economy with downward momentum and there is no doubt that these numbers are weak.
Several major companies, including three Dow components issued warnings and/or cut jobs.
In response to weak demand due to the slowing global economy, Alcoa (AA) is cutting its workforce by more than 13,500 employees, or 13% of its worldwide workforce by the end of 2009. In addition, Alcoa said it would eliminate 1,700 contractor positions and institute a global salary and hiring freeze. The aluminum company also said it is "stopping all non-critical capital investment." Shares of Alcoa fell 10.7% for the week.
Intel (INTC) said its fourth quarter revenue will be lower than previous expectations, citing further weakness in end demand and inventory reductions by its customers. The company now projects fourth quarter revenue of $8.2 billion compared to the $8.74 billion First Call consensus. Intel is scheduled to report its fourth quarter earnings after the close on Jan. 15. Shares of INTC fell 6.9% for the week.
Wal-Mart (WMT) said that same-store sales increased 1.7% in December. The Briefing.com consensus expected sales to increase 2.9%. Shares plunged 9.8% as many traders thought Wal-Mart would perform better as cash strapped consumers looked for deals.
Meanwhile, leading electronics retailer Best Buy (BBY) reported a 6.5% drop in December same-store sales as strong TV sales were offset by weakness in digital cameras, video games, movies and music.
WMT and BBY were among many retailers reporting dour December results -- of the 31 retailers reporting same store sales that Briefing.com covers, only six had positive sales and nine issued downside guidance.
Consumers are also avoiding major purchases, with December auto sales at GM (GM) and Ford (F) dropping 32.4% and 31.4%, respectively.
Other notable companies that gave negative earnings/revenue outlooks include Time Warner (TWX), Macy's (M), Gap (GPS), Coach (COH), and TJX (TJX).
In commodity trading, crude oil futures had massive swings. Prices surged 8.9% to $46.34 per barrel as the the unrest in the Middle East continued. The gains did not last long, however, as crude ended the week with a 12.6% loss at $40.49 per barrel after the weekly energy inventory report on Wednesday showed more evidence that the global economic slowdown is causing demand destruction.
The S&P 500 is now 20% above its multi-year low that was reached in November. It is down 38% from its 52-week high and down 44% from its all time high reached in October 2007.
**The S&P 400 Midcap Index, which isn't included in the table below, lost 3.8% this week and is and is down 1.4% year-to-date.
| Index | Started Week | Ended Week | Change | % Change | YTD % |
| DJIA | 9034.69 | 8599.18 | -435.51 | -4.8 | -2.0 |
| Nasdaq | 1632.21 | 1571.59 | -60.62 | -3.7 | -0.3 |
| S&P 500 | 931.80 | 890.35 | -41.45 | -4.4 | -1.4 |
| Russell 2000 | 505.82 | 1223.01 | 717.19 | 141.8 | 144.9 |
