Financial Headline News for Thursday 10/13

Thanks to the negative bank earnings, the Dow was down today.

First time unemployment claims came in at 404,000 today which was 1,000 less tha nexpected. yet another week over the dreaded 400,000 mark.

Just like goods, supply and demand also applies to the job market as the number of unemployed increases, salaries are decreasing.

Here are the top financial stories of the day:

1) Banking Stocks Pull Dow Into Red-From The Wall Street Journal

The financial sector led stocks lower following less-than-stellar results from J.P. Morgan Chase, while strength in technology shares limited the broader market's losses.

The Dow Jones Industrial Average fell 40.72 points, or 0.4%, to 11478.13, after dropping as much as 141 points on Thursday. It marked the Dow's second drop in the last three sessions and biggest decline since Oct. 3.

The blue-chip index still is up 5.2% this month and briefly moved this week into positive territory for the year before pulling back. It is down 0.9% this year.

The Standard & Poor's 500-stock index eased 3.59 points, or 0.3%, to 1203.66. Financial and industrial stocks registered the biggest declines, while technology stocks rose.

Meanwhile, the Nasdaq Composite rose 15.51 points, or 0.6%, to 2620.24, marking its fourth straight gain. The technology-oriented index has gained 12% over the last eight trading sessions.

Google rose $10.49, or 1.9%, to 558.99, in the regular session ahead of its quarterly results. The stock jumped in after-hours trading after the Internet company's third-quarter earnings came in well ahead of analysts' estimates.

Financial stocks notched the sharpest declines. J.P. Morgan Chase reported a slight drop in third-quarter earnings. Investment-banking operations were weak, as expected, and took a toll on results, although the damage was partially offset by strong lending to businesses and revenue gains in the consumer business. Shares fell 1.60, or 4.8%, to 31.60.

Other bank stocks also slumped. Bank of America led the Dow lower, dropping 36 cents, or 5.5%, to 6.22. Citigroup lost 1.56, or 5.3%, to 27.64, and Morgan Stanley shed 70 cents, or 4.4%, to 15.14.

"The earnings so far haven't been blowing the doors off like many of us had hoped," said Jack Ablin, chief investment officer at Harris Private Bank. "And there are still big unresolved issues out in Europe."

Elsewhere, crude oil fell for a second consecutive day, sliding 1.6%, to $84.23 a barrel. Gold prices edged down 0.8%, to $1,667.30 a troy ounce.

2) Applications for unemployment aid barely changed-From the AP

The number of people applying for unemployment benefits fell slightly last week, a sign the job market isn't getting much better.

Applications ticked down by 1,000 to a seasonally adjusted 404,000, the Labor Department said Thursday.

The four-week average declined for the third straight week to 408,000. That's the lowest average in eight weeks.

Still, applications are higher than they would be in a healthy economy. They need to fall consistently below 375,000 to signal sustainable job growth. They haven't been below that level since February.

The report suggests that layoffs have declined in recent weeks. But other data show hiring hasn't picked up.

Ellen Zentner, senior economist at Nomura Securities, said applications around 400,000 indicate a neutral job market, "one that's neither picking up, nor deteriorating."

Only a few weeks ago some had feared the risks of another recession had grown. So "even neutral readings are good," she said, because they signal that conditions aren't worsening.

Employers pulled back on hiring this spring, after rising gas prices cut into consumer spending and Japan's March 11 earthquake disrupted supply chains, which slowed U.S. auto production.

In recent months, gas prices have eased slightly and supply chains are flowing more freely. Yet hiring hasn't improved much. Employers have added an average of only 72,000 jobs in the past five months.

That's far below the 125,000 per month needed to keep up with population growth. And it's down from an average of 180,000 in the first four months of this year.

In September, the economy generated 103,000 net jobs. That's enough to calm recession fears, but it is far from what is needed to lower the unemployment rate, which stayed at 9.1 percent for the third straight month.

Thursday's Labor Department report also showed that the number of people who are receiving unemployment benefits fell by 55,000 to 3.67 million. That's the lowest level since April.

That figure doesn't include several million additional people who are receiving benefits under extended programs put in place during the recession.

All told, 6.8 million people received unemployment benefits in the week ending Sept. 24, the latest data available.

Without more jobs and higher pay increases, consumers are likely to keep spending cautiously. Consumer spending accounts for 70 percent of economic activity.

On Wednesday, the Labor Department said companies posted fewer jobs in August than the previous month, the first decline in four months. Economists said it was another sign that companies are reluctant to hire.

On a positive note, the turmoil didn't boost job cuts. Employers laid off 1.66 million people in August, the Labor Department's report said Wednesday. That's down from July and far below the peak during the recession of 2.5 million.

3) Workers Lose Pricing Power-From The Wall Street Journal

Competition drives down prices. This is as true in the labor market as with any other marketplace.

Labor Department figures out Tuesday showed the number of U.S. job openings fell in August for the first time in four months, to about 3.1 million. At the same time, the number of unemployed rose to nearly 14 million. In other words, there were roughly 4.6 job seekers for every opening in August, up from 4.3 in July.

Little wonder that the average hourly earnings of workers declined during the month. In fact, intense competition for jobs is a key reason why U.S. incomes broadly are under so much pressure. There were never more than three job seekers per opening even during the worst of the last jobless recovery.

That figure shot as high as seven during the worst of the recession in 2009. Today, it has yet to recover to anything like the average of two seekers per opening during the expansion of 2004-07.

This helps explain the sharp recent worsening of U.S. household finances—and sentiment. A study by two former Census officials released Monday showed that in real terms, the annual income of the typical U.S. household has fallen from $55,309 in December 2007 to $49,909 as of June, a drop just shy of 10%. This is partly because of the higher unemployment rate. Even for households headed by a full-time worker, however, median income has fallen by more than 5%.

And as Credit Suisse economist Henry Mo points out, even if all U.S. job vacancies were filled overnight, nearly 11 million workers would still be unemployed—and that doesn't include the nine million working part-time who would prefer full-time work and the 1.2 million who have given up looking altogether. Although the pace of layoffs has slowed, there simply aren't enough new positions to go around. In fact, separate Labor Department figures show the average number of people employed by new firms has been on a downward trend for two decades.

Given all this, deflationary pressure on incomes is likely to persist. While that helps companies control costs, it will also constrain consumer spending. That is because prices of certain household necessities, like food and gas, haven't been deflationary enough. The global commodity market is much tighter than the U.S. labor market. This, unfortunately, is the new normal.

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