Disappointing Jobs Figures Can't Drag Stocks Down


Blue-chip stocks are flat this afternoon despite downbeat news about employment and a housing report that some are interpreting as negative. With roughly an hour remaining in the trading session, the Dow Jones Industrial Average is off by 14 points, or 0.09%.

The Department of Labor released figures this morning suggesting that the recovery in the employment figures continues to be uneven. After adjusting for seasonal variations, an estimated 360,000 people filed for unemployment benefits last week, an increase of 32,000 from the preceding week. Economists surveyed by MarketWatch had expected the figure to come in at 330,000.

If there is a silver lining, it's that the disappointing news should reduce pressure on the Federal Reserve to taper back its third round of quantitative easing, under which it's been purchasing $85 billion a month in government and mortgage bonds. As a fund manager quoted by Bloomberg News noted, "The U.S. economy is still struggling with lackluster growth, and the recovery is far from self-sustaining, so equity markets are looking for guidance from central banks for their liquidity high."

The Department of Commerce issued a report (link opens PDF) today showing that the recovery in the housing market slowed down last month. According to its estimates, privately owned housing starts in April came in at a seasonally adjusted annual rate of 853,000. That amounted to a 16.5% decrease from the previous month, in which workers broke ground on an estimated 1.02 million homes.

Digging into the report a bit deeper, however, reveals that the news on this front is far from all bad. First, the double-digit decline is largely attributable to a slowdown in multifamily construction, as single-family housing starts declined by only 2.1% on a sequential basis. And second, on a year-over-year basis, total housing starts still rose by an impressive 13.1%. As an analyst I quoted earlier noted, "While the recovery in housing construction is likely to continue, this report shows that it is unlikely to be linear."

In terms of individual stocks, shares of Cisco Systems are soaring almost 13% after the company reported better-than-expected earnings after the closing bell yesterday -- click here to read the earnings release. Its results beat on both the top and bottom lines. Excluding one-time items, it earned $0.51 per share on $12.22 billion in revenue, compared to consensus estimates of $0.49 per share and $12.18 billion, respectively.

As my colleague Dan Dzombak discussed earlier today, the news was particularly upbeat given that analysts had recently been lowering their expectations for Cisco after its competitor Juniper Networks disappointed analysts at the end of last month. At the time, Juniper downgraded its forward guidance due to concerns about "weakness in the enterprise customer spending environment." Following the announcement, shares of Juniper fell by nearly 10%.

On the flip side, shares of Wal-Mart are turning in the worst performance on the Dow, down by 2.3% at the time of writing. As with Cisco, the move is related to the retail giant's earnings release, but in this case investors were unimpressed. The biggest concern was the news that U.S. same-store sales fell by 1.2% in the last quarter -- and the decline was 20 basis points worse if Sam's Club's sales are excluded.

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Originally published