The jobs data is the make or break number for markets Friday. The monthly data, reported at 8:30 a.m., is expected to show a decline of 75,000 non-farm payrolls and an unemployment rate of 5.5 percent.
But Thursday's disappointing second quarter GDP and weekly jobless claims data ratcheted up the fear factor around the jobs numbers. It also helped trigger an end of month sell off that sent stocks sharply lower.
Monthly auto sales are also expected Friday. Adding to the sour mood around the auto sector will be General Motors' before-the-bell earnings report. Chevron and NYSE Euronext also report ahead of the open.
Other news to watch includes Yahoo's shareholders meeting. It should be interesting though maybe not as raucous as it might have been, now that investor Carl Icahn has joined its board.
On the economic front, ISM manufacturing and construction data are also expected Friday at 10 a.m.
But its the jobs data that matters most. "If there's a jump up in the unemployment number, people are again going to be focus on the economy," said Robert Harrington, head of block trading at UBS. He said the economic news overshadowed most other news in Thursday's market, though there were a lot of individual earnings-related stock moves. He said the Bristol-Myers bid for Imclone also stirred up activity in that sector.
In Friday's market, he expects the jobs data to be the major factor and of course, traders will also watch the price of oil. Oil fell 2.1 percent or $2.69 Thursday to $124.08 per barrel. For the month, oil is down 11.4 percent, its biggest monthly decline since December, 2004. It is still up more than 60 percent since last year.
"I think we'll be down between 70,000 and 80,000 (non farm payrolls)," said Michael Darda, chief economist at MKM Partners. The weekly jobless claims, reported Thursday, were surprisingly higher than expected at 448,000, which traders took as a bad omen for the monthly unemployment report.
"I don't see how the labor market makes a recovery with this kind of strain in the credit area," said Darda. He said credit spreads are still "a mile wide in mortgages and the swaps area."
"Four times in the course of the last year, it appears that the credit markets are stabilizing. Then they just fall apart," he said.
Traders say some of the apprehension about the jobs report may have already been factored into the stock market Thursday, and if the number is not worse than expected, it might be a plus for stocks.
The Dow Thursday fell 1.8 percent or 205 points to 11,378, and the S&P 500 was off 16, or 1.3 percent, but the Nasdaq slid just 0.2 percent. The worst performing S&P sector was energy, off 3.4 percent Thursday for a one-month decline of 14 percent. The best sector Thursday was health care, up 0.3 percent and up nearly 5 percent in the month of July. The best performing sector in July was the financial group, up 6.8 percent.
Thursday's sell off gained momentum in the final hour. Traders said that was in part end of month volatility, but comments from former Fed Chairman Alan Greenspan also spooked the market. Traders pointed specifically to remarks Greenspan made about Fannie Mae and Freddie Mac during an interview with Maria Bartiromo on "Closing Bell."
"Fannie and Freddie are a major accident waiting to happen," he said. He said that they are an "unstable structure" and should not continue to exist as quasi public/private entities. He suggested that they should be nationalized and then broken up into a group of smaller entities, which could be sold back into the market.
Greenspan also said the U.S. is on the brink of recession, and a key factor that could tip the economy is the slowing growth in the world economy. He also made a rather disturbing comment about the current financial crises.
"We've had huge amounts of liquidity engendered by central banks, and it's getting increasingly evident that this is a once-in-a-century type of phenomenon. It is not the standard liquidity crisis we've seen in the past. It's verging on the issue of solvency," he said.
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