Let's face it. Nothing about Friday's employment report will be pretty, and the 7 percent decline in stocks this week has been signaling that.
Yet, stocks enter Friday still nervous about a jobs number that some economists say could point to a worse-than-expected decline in the economy during the first quarter.
Economists expect the biggest job losses in 60 years, with a decline in non-farm payrolls of 650,000 and an employment rate of 8 percent.
Traders are holding out hope that the vicious selling in the stock market this week is a sign it is closing in on capitulation, and a bad jobs report could be the trigger for a big sell off.
"There's always a chance. The level of despondency is very high. Unfortunately the run rate is a little lower than the recent sell off," said Art Cashin, UBS director of floor operations.
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Cashin, in a note, said Thursday that the anecdotal sellers this week were retail investors.
Interestingly, it's the retail clients who are always viewed as the last to capitulate and the last into a rally.
On Thursday, stocks were weak out of the gate and the decline accelerated as bank stocks floundered.
Citigroup cracked the $1 per share mark for the first time, and the financial sector lost nearly 10 percent.
General Motors skidded 15 percent after the company Thursday morning told the SEC in a filing that it could be forced into bankruptcy if its viability plan does not succeed.
General Electric , in a tailspin all week, was off just slightly after CFO Keith Sherin defended the GE Capital unit in an interview on CNBC's "Squawk Box." He said the speculation about risk in GE Capital is overdone and that there are no time bombs lurking there. GE owns NBC Universal, the parent of CNBC.
The Dow finished at 6594, down 281 or 4.1 percent, a level not seen since April, 1997. Two-thirds of the Dow components hit new multi-year lows, and just four—Verizon , Pfizer ,IBM and Wal-mart were above 52-week lows.
The S&P 500 fell 4.2 percent to 682.55, the dead middle of the 680 to 685 support range.
Cashin said if the S&P dips below 680, it is in the "land of dragons." The S&P is now down 7 percent for the week, its worst weekly decline since November and its lowest close since September, 1996.
As stocks spun lower, gold Thursday jumped $21 per troy ounce to $927, and buyers also ran to the safety of Treasurys. Crude fell $1.77 per barrel, or 3.9 percent to $43.61.
"Something's got to give," said M.F. Global John Kilduff. "Either the stock market is the buy of the century, or oil is going to $20. You can't have $45 oil and a 6,500 Dow."
The jobs report is released at 8:30 a.m. Friday. Consumer credit is reported at 3 p.m.
In Washington, the Joint Economic Committee looks at the employment situation and hears from the Bureau of Labor Statistics.
"We're looking for a 700,000 drop in non-farm payrolls and the unemployment rate to drop to 8.1 percent," said Citigroup economist Steven Wieting.
Wieting said the sharp drop in demand last fall led to a rapid and steep slump in production, which is fueling a broad decline in jobs at all levels and across a broad range of industries.
"We think unemployment could be 9 percent by mid to late spring. The process of getting production down this rapidly right now accelerates the process," he said.
For now, Wieting expects a contraction of 5.1 percent in first quarter GDP. Fourth quarter GDP was revised to down 6.2 percent, and some economists have been adjusting their first quarter forecasts.
Richmond Fed Chairman Jeffrey Lacker, in an interview with CNBC's Steve Liesman Thursday, offered his view that the jobs report will be poor, but there will be a return to growth by the end of the year.
"We'll have a few more dismal reports as well. Probably one tomorrow morning on the unemployment report. For the next couple of months, declines. But I'm expecting a bottom at the end of the year, and a turnaround and a little positive growth," he said.
Miller Tabak's Tony Crescenzi raised the idea that the February jobs report could be the worst of the recession. He said if the data is much weaker than expected, it could trigger buying in risk assets, like stocks.
He said that would be because many economists believe the first quarter will be the worst of the current recession and they could see the jobs data as potentially pointing to a trough.
"The thesis rests on the idea that the report has the potential to be the worst of the recession. Why? Because it will capture job losses from beginning-of-year business closings, which tend to be highest in January (the survey date for the report is mid-January to mid-February), and from businesses adjusting to the realities that emerged in Q4," Crescenzi wrote in a note.
"This is an idea that many already understand and is embedded in the consensus forecast. Nevertheless, it is an idea that won't be fully appreciated until investors are staring further into the abyss. This means that investors will upon assessing the outlook for the laggard jobs data peer over the valley and decide that the February jobs data might be the worst of the recession."
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