The U.S. equities market is nearing recession status in 2016, with the S&P 500 down 8% on the year and the Dow Jones Industrial Average and the Nasdaq following suit with 7% and 12.87% declines, respectively.
Jobs data
Friday’s U.S. jobs report didn’t help either. According to the report, the United States added 151,000 jobs in January, well below the 190,000 target by economists. The unemployment rate dropped to 4.9% from 5%, however. Thus far, the job market has been a boon for the U.S. economy, and it was one of the main reasons the Federal Reserve hiked the federal funds rate in December.
So to see that the following month’s report is weak shows that the economy may have hit a rough patch. The country’s main indexes took a hit on the new Friday, with the Nasdaq taking the biggest hit — though that may be more due to shock waves from LinkedIn’s implosion. One month’s reporting, however, doesn’t a problem make. There are a number of reasons why the jobs data was weak in January. It would behoove investors to wait a little while longer and see if it turns into a trend before bailing.
Oil worries
It doesn’t seem like oil prices are going to rebound anytime soon. Again, what’s happened over the last few days doesn’t help the situation. A meeting took place Sunday between OPEC producers Venezuela and Saudi Arabia. The former doesn’t have the type of cash reserves as Middle Eastern OPEC countries and was looking for an agreement to boost prices.
It seems, however, that the meeting yielded little confidence of a course correction for the big oil producers. As such, oil prices dropped another few percentage points on Monday.
“The market is likely to remain highly volatile and dangerous,” warns PVM Oil Associates analyst David Hufton. “Unless there is some pretty bullish news in the next few days the contracts are likely to erode value and head south.”
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