US Stock Market Recap: Rise In Unemployment Rate Drags Stocks Down

The markets attempted to rally multiple times during the day, but when the bell sounded they closed below their already lower opening levels. The Dow Jones Industrial Average (^DJI) closed down -1.64% to 8.599.18 while the S&P (^GSPC) and Nasdaq (^IXIC) both closed down -2.13% and -2.81% respectively to levels of 890.35 and 1,571.59. The reasoning behind the big down day was the largest monthly and yearly drop in jobs in the United States. During December of 2008, the United States lost over 524,000 jobs, closing 2008 as the most nominal job losses since records starting being kept. Initially investors somewhat shrugged off this news but in the end of the day it was too large of a hurdle to overcome.

Citigroup (C) announced today that they were going to spin off their brokerage arm, Smith Barney. Details were not given as to exactly how this transaction would take place, but there are rumors of a joint venture with Morgan Stanley’s (MS) brokerage arm. This comes on the same day as Robert Rubin, a member of Citi’s board of directors and former President Clinton advisor, announced that he would be stepping down from Citigroup’s board. The common stock was down almost 6% on the day due to both major new stories.

There were a few news stories out of the nation’s capital today. Senator Barney Frank (D) came onto CNBC and made many contradictory remarks about the qualifications for TARP going forward, even stating that the banks that were forced to take TARP (Troubled Asset Relief Fund) money will now be allowed to give the money back if they do not agree to the executive compensation caps and the mandate to liquidate all company aircrafts. Many of the participating banks did not want the TARP money but Secretary of the Treasury Hank Paulson left them with no choice. This new set of rules could present an interesting situation in the equity markets as banks that give back their TARP funding will be viewed as much more stable than those that keep the funding.

The White House also announced today that the Bush TARP team will stay on for the first few weeks of the Obama administration in order to make sure that the transition goes extremely smooth. The Bush TARP team has only spent the first half of the original $700B, and it is believed that the Obama TARP team will be allowed to spend the second $350B. Many are speculating that their will be a shift in strategy as opposed to Paulson’s adhawk but effective management of the money.

In other news, Boeing (BA) announced that it will cut 4,500 jobs. This move did not come as a shock to many as their orders for aircrafts are down over 35% year over year. Continued delays with their new Dreamliner have caused many headaches at the aircraft manufacturing giant, and it seems that more trouble may be on the way.

Disclosure: None.

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