After falling 1.3% yesterday, the Dow Jones Industrial Average (INDEX: ^DJI) closed the week down 1.4%. The red ink was thickest for these three names:
Bank of America (NYS: BAC)
Caterpillar (NYS: CAT)
Cisco (NAS: CSCO)
Caterpillar and Bank of America plunged after yesterday's mediocre jobs report. When jobs are scarce and employers stingy on wages, it becomes harder to pay off household and consumer debt. Two-thirds of B of A's loans -- $600 billion -- fall into these categories, so the bank should have a strong interest in full employment. Though JPMorgan Chase (NYS: JPM) , which plunged 3.7% this week, has more extensive trading and investment banking operations than B of A, it of course has quite a bit of exposure to household and consumer debt, too.
It's a similar worry for Caterpillar. It's hard to get construction unless we see paychecks that allow consumers to buy things, or government spending picks up.
Unfortunately for Cat, unprecedented budget cutbacks -- particularly at the state and local level -- continue to decimate transportation construction. Transportation was one of the only sectors of the economy to actually lose jobs after state and local spending cuts subtracted 0.14 points from GDP. And you don't ordinarily associate tech stocks with economic cyclicality, but Cicso does depend on government contracts for a big part of its business. The company reports quarterly earnings next Wednesday, so we'll find out soon enough.
One mediocre jobs report doesn't spell doom, but investors are clearly afraid of a three-peat to the past couple of years, where the recovery seemed strong but ultimately failed to pick up enough steam.
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At the time thisarticle was published Ilan Moscovitzdoesn't own shares of any company mentioned. You can follow him on Twitter, where he goes by@TMFDada. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Cisco Systems. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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