In The News: The Unemployment Rate Was Unexpectedly High, Prompting Many Investors to Shift Strategies, and Causing Many Stocks to Sink.

MARKET SYNOPSIS

Unemployment rates are a great indication as to where consumers will be shifting their expenses. On Thursday July 3rd the Labor department released the unemployment rate with no indication of a recovering economy. Investors’ hopes of rising stocks and steady growth were quickly shattered after the report causing many stocks to plunder. At the same time venture capital firms are having a hard time selling their portfolios in the U.S. and Europe. On another note, Merkel will meet with the world leaders next week to advise them how to prevent more crises from happening again.

Unemployment results are in, and there is no signs of a recovering economy

In the month of May unemployment was at 9.4%, and in June it went up 9.5% nationwide. The unemployment rate has not been this high since August 1983. The Labor Department reported that 467,000 jobs were cut in June. In addition, payrolls fell by 136K compared to May when it decreased 156K. Factory, builders, retail and financial firms’ payroll suffered a loss.

In a separate report, Wall Street hopes were crushed, when they noticed the job rate was worse than expected. This report can be an indication that the recession will still drag on.  In addition 30 Dow Jones stock fell, IBM (IBM), Wal-Mart (WMT), Exxon (XOM) are some companies among the biggest losers. In the New York Exchange there were more losers than winners by 4 to 1. On Wednesday the stock market had a good jump, due to good news in the housing market. However on Thursday the job report gave investors reason to believe that this recession is not over.

Crude oil is down, following in the footsteps of unemployment

Crude oil for August is down by 3%, at $66.73 a barrel on the NY Mercantile Exchange. Brent crude also went down to $66.65 a barrel. This slump was the cause of the unemployment report. Last year on July 3^rd 2008, crude prices were at an all time high of $145.29 a barrel. Unemployment is so bad that consumers will not be taking a long drive this vacation. As a result the oil industry feels the anguish of falling stocks at the beginning of this third quarter. The difference of last year an now, July 3^rd 2009 is that even though last year gas was expensive people had a sense of job security. Now, gas prices are lower, but there are a lot of unemployed people that will cut back on commodities. 

Venture capital firms have a hard time selling portfolios in the U.S. and Europe

In the U.S. venture capital firms recognizes signs of a good 2^nd quarter. It is reported that 5 venture capital backed U.S. companies went public in the second quarter, compared to zero in the previous 6 month. Some Venture-capital firms are feeling the pain as they can not sell or list their European portfolio companies.  According to the Dow Jones VentureSource, there has not been an initial public offering (IPO) since the fall of 2008. There have been 34 acquisitions of venture capital backed European companies in the first 6 moth of the year. Venture capital firms have not seen so much silence since 2000.

A mesage to the world leaders

German Chancellor Angela Merkel will advise the world leaders next week to prevent any bubbles and crises from getting out of hands. She said “In recent years we've had the Asian crisis, the new-economy crisis, and now this great international financial and economic crisis -- we can't slide into a crisis every five to seven years.” As we move into a global market, different countries depend on other countries economic health.