The Week That Never Happened

As many Americans were looking forward to starting the long Labor Day weekend in the United States, markets worldwide began sliding again on Friday.

HAPPY LABOR DAY

Ironically timed with Labor Day, the U.S. Department of Labor reported zero job growth for the first time in over 66 years. The last time the numbers came up empty was in the waning months of World War 2. Since no jobs were reported lost last week, the unemployment rate remained unchanged, at 9.1%. The lack of job growth prompted a wide-ranging sell-off before the close of the markets. Earlier in the week, U.S. Indexes had been up 2-3%.

The Nasdaq closed at 2,480.33, less than half a point higher than it closed on August 18, and the S&P finished within three points of its close on August 18th. The Russell 1000 and Germany’s DAX also were remarkably close to their close on that day, and the NYSE Composite differed by only 5 points. To put it simply, it’s as though the week before last never happened. August 25th’s gains have been wiped off the slate. Gold and silver are sky high again, closing at $1,886.70 and $43.30 per troy ounce, respectively.

Outside of the banking sector, some of the biggest losses were had by H&R Block (-12%) and Netflix (-9%). Newmont Mining, Supervalu, and Consolidated Edison were among those stocks managing to post significant gains.

Bank stocks were at the forefront of the sell-off. Bank of America’s shares took the brunt of the fall, losing 8.3%. JPMorgan Chase, Citigroup, and others also lost value. Bank stocks have taken a beating throughout the year amid expectations of legal costs from forthcoming litigation.

The Federal Housing Finance Authority, which oversees U.S. mortgage giants Fannie Mae and Freddie Mac, filed suit against 17 multinational financial institutions, including Bank of America, JPMorgan Chase, Citigroup, Barclays, Goldman Sachs, Countrywide, RBS, Morgan Stanley, and Deutsche Bank.
The suit alleges that the banks violated regulations and mislead investors as to the value of mortgage-backed securities and seeks reimbursement and damages for costs resulting from the bad loans. Even Wells Fargo, which was not named in the suit, saw its shares fall.

The U.S. dollar rose in relation to the euro, but still finished weaker than the Japanese yen and the British pound.

After reaching a 30-day high, Canada’s dollar weakened this week. It has declined more than 5% this year overall. In contrast to the U.S., Canada added 24,000 new jobs during the month of August, more than three times its job growth for July. Canadian unemployment is currently at 7.2 percent. U.S. and Canadian crude oil prices dropped by approximately $2.00 a barrel.

European Markets were quick to follow suit, dropping on the heels of the disappointing U.S. employment data. Several mining firms posted losses. The UK financial sector was also hit hard: Barclay’s dropped 8.4%, closely followed by Lloyd’s of London, which lost 7.14%, Royal Bank of Scotland, down 5.37% and HSBC UK, which fell 2.6%.

Asian markets finished lower as well at the end of trading.
It kind of makes you glad the NYSE won’t open again until Tuesday, doesn’t it?

U.S. Department of Labor

Federal Housing Finance Authority – Announcement of Litigation