Widespread losses across European markets on Monday led the U.S. indices to spike lower at the open. The Dow Jones Industrial Average produced another triple-digit decline with a drop to 7,880 this morning. The NASDAQ and S&P 500 both followed suit and the volatility index (VIX) jumped sharply at the open.
Stocks tried to bounce midday and the S&P 500 and the NASDAQ both made it back into positive territory until news hit that Macy's was slashing its workforce as they face a tough 2009. This news let the air out of what was a slow rising bounce in stocks.
Retailers will continue to struggle as consumers spend less. The U.S. consumer spending report for December was released today. The report showed another decline. Nominal spending was down 1% for the sixth month in a row. Consumers may have more cash due to lower fuel prices but they're hoarding it as Americans save for what could be a tough year.
The Macy's news (symbol: M) came out midday. The company said that tough economic conditions and the likelihood of lower sales in 2009 was forcing them to cut 4% of its workforce and reduce its dividend. M is cutting its quarterly dividend from 13.25 cents down to 5 cents. A 4% drop in its payroll is about 7,000 employees. The stock fell 16% intraday to $7.50 but has bounced back to $8.40 (-6%).
Another U.S. company on the brink of job cuts is Morgan Stanley (MS). At least that is what the Wall Street Journal is saying on their website. An online article this morning suggested that MS will be cutting 4% of its workforce or about 1,800 jobs in February. This would follow about 7,000 job losses in 2008.
Overall the stock market is struggling. After the Macy's news hit the major indices fell to their lows for the day. Most of the major sectors are down. Gold is down more than 2% after spiking higher this morning. Oil is down and the USO looks poised to break support in the $28.50-28.00 zone. The only sectors showing any gains today are healthcare, drugs, biotech, and a few smaller tech industries.
One concern I have is the Dow Jones Transportation index. The $TRAN is off more than 3% and is breaking down under its November 2008 lows in what is probably a new leg lower. With both the financials and the transports falling the market has almost no chance of any kind of sustainable rally.
Chart of the $TRAN: