Finance Fuels the Dow Following a Jump in Jobs
The Dow Jones Industrial Average can't make up its mind about today's jobs report. Jobs jumped more than projected, but the Dow has swung wildly between hundred-point gains and minor losses. It has finally settled high in the green in afternoon trading, up 122 points as of 2:15 p.m. EDT. Most stocks are gaining today, with several rising substantially to end investors' week on a high note. Let's catch up on the movers and stories you need to know about.
The ups and downs of a good jobs report
The American economy picked up 195,000 jobs in June -- a whopping 40,000 more jobs than economists had projected, though not enough to shake up the country's 7.6% unemployment rate. A deeper look into the statistic reveals potential concerns, however: The largest gain in hiring came from food service and hotels, with retail, services, and health care also adding to the mix. It was enough to send the U6 unemployment rate -- a measure that includes the unemployed, those who can find only part-time work, and those who have given up searching for a job -- up to 14.3% from a previous 13.8%. While the economy is adding jobs, they may not be the types of jobs that enhance the long-term economic outlook.
Regardless, financial stocks have welcomed the news today, with consumer-oriented American Express leading the pack. The firm's shares have risen by 2.1% today, but while the gain in jobs is a great sign for spending -- and thus American Express's business -- the company's going through a transition of its own that demands attention. American Express named a new CFO late in June, hiring former McKesson CFO Jeffrey Campbell to replace the outgoing Daniel Henry, who will retire later in 2013. How Campbell steps in to handle the company's finances will play a big role in the firm's success going forward, particularly as the U.S. economy ramps up and consumers feel more optimistic about its direction.
JPMorgan's is up 2%, but the bank's rise today comes after a New York court green-lighted the company's settlement with failed brokerage MF Global. The settlement, said to be worth $546 million, may be a financial blow to the bank as it reimburses claims of losses from MF Global's collapse, but it clears up one of JPMorgan's remaining legal headaches as the business looks to move forward. That peace of mind is worth it to investors who have suffered enough legal losses from the banking sector -- particularly from JPMorgan's "London Whale" scandal that dominated headlines.
The Dow's consumer stocks are also on the rise, with 3M shares up 1.9%. More jobs and increased consumer spending should help 3M's revenue stay on course in the future, but at least one leading financial firm is cautious about the company's direction. Morgan Stanley downgraded the stock from "overweight" to "equal weight" earlier in the week, citing the stock's run-up this year as evidence that it may not have much more room to run ahead of rivals in its space. While that may be worrisome to short-term traders, it's no bother to long-term investors: 3M's a solid pick for income investors with its 2.3% dividend yield and highly manageable 38% payout ratio, and the company's consistent gains in sales over the past few years despite a sluggish economic recovery offers hope for a stable future. Perhaps Morgan Stanley is right and 3M will struggle to rise the rest of the year, but in the long term, this stock is as stable a cash cow as you can find.
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Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends 3M, American Express, and McKesson. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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