Nonfarm payrolls up just 18,000, well short of expectations of 70,000, weakest since August 2003. The November number was revised upward to 115,000 from 94,000 and futures dropped ten points initially. The dollar weakened.
The Iowa victories of Barack Obama and Mike Huckabeehas got Wall Street talking--about populism. Both of these candidates made a last-minute push emphasizing greed on Wall Street ("Many CEOs make more money in ten minutes than many working people do in a year," Obama said recently).
There is also rising protectionist sentiment in Congress, and calls for higher corporate tax rates. Does any of this get any traction in 2008? Most on Wall Street would have said no, until the Iowa election results came in.
Regions Financial --one of the largest regional banks in the Southeast--became the latest bank to set aside provisions for bad loans. This time it's $360 million set aside, largely for loans to residential homebuilders.
The losses and other charges may wipe out profits for the quarter (analysts had expected a profit of $0.63). They expect the weakness among homebuilders to extend will into 2008. The bank has $7.5 billion in loans to residential builders in states like Florida and Georgia. Regions is down 4 percent pre-open and will likely open at a five-year low.
Cleveland's National City cut its dividend by nearly half on Wednesday due to similar problems.
Update: The news this morning has not been stock-friendly. As mentioned above, First Regions Financial, one of the largest banks in the South, announced they were setting aside $360 m for potential losses, mostly to home builders. Then the poor nonfarm payrolls report came out.
In addition, a couple of consumer companies are also noting that sales were poor in the fourth quarter.
1) Wendy's became the latest restaurant to announce poor fourth quarter sales, particularly in November and December. Average same-store sales at U.S company restaurants decreased 0.8 percent for the quarter (it increased 3.1 percent in the same period last year).
2) Bed Bath and Beyond last night said fourth quarter profits would be below estimates.
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