ShareThis Page
Business

Unemployment falls, but stocks struggle on global concerns

| Saturday, Jan. 7, 2012

The stock market offered a reminder on Friday that even if the job market is improving, there's plenty to worry about elsewhere in the world.

The unemployment rate fell in December to 8.5 percent, the lowest level in nearly three years. Yet stock indexes teetered between small gains and losses all day as traders fretted about Europe's ongoing financial drama.

Italy's borrowing costs spiked to dangerously high levels and the euro fell to a 16-month low against the dollar. U.S. bank stocks fell on concerns that the debt crisis will spread through the financial industry.

The Dow Jones industrial average ended down nearly 56 points and the S&P had a tiny loss, its first of the year. Both gained more than 1 percent over the first week of 2012.

Most European markets closed lower after new data showed economic sentiment and retail sales falling across the region. Unemployment is stuck at 10.3 percent in the 17 nations that use the euro.

Europe's debt woes and China's slowing economy are overshadowing signs of strength in the U.S. economy, said Doug Cote, chief market strategist at ING Investment Management.

"The global risks continue to exert their weight," Cote said. Ultimately, improving U.S. stronger consumer demand, manufacturing activity and corporate profits will drive U.S. stocks higher, Cote said.

The Dow Jones industrial average fell 55.78 points, or 0.5 percent, to 12,359.92. Alcoa Inc. was the Dow's biggest loser, slipping 2.1 percent. A Citi analyst forecast that the aluminum maker lost money in the fourth quarter of 2011 for the first time since the recession. Alcoa, which reports earnings on Monday, said late Thursday it would close an aluminum smelter in Tennessee and other operations to cut costs.

In other trading, the Standard & Poor's 500 index fell 3.25 points, or 0.3 percent, to 1,277.81. The Nasdaq composite index rose 4.36, or 0.2 percent, to 2,674.22.

It was the second day in a row of indecisive trading on the stock market. The Dow and the S&P closed nearly unchanged Thursday. The indexes still had strong gains in this first, shortened trading week of the year. The Dow is up 1.2 percent this week, the S&P 1.6 percent. Trading was closed Monday, when the New Year's Day holiday was observed.

The euro fell as low as $1.2696 yesterday, its lowest point since Sept. 10, 2010. The yield on the 10-year Treasury note fell to 1.97 percent from 2 percent late Thursday as investors put money into low-risk investments. Bond yields fall when demand for them increases.

Italy is now paying 7.09 percent to borrow for 10 years, reflecting investors' fears that the nation might default. Ireland and Portugal were forced to take bailouts when their ten-year borrowing rates rose above 7 percent.

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.

click me