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Stocks To Fall Sharply At The Open In Reaction To Jobs Report - U.S. Commentary

4/9/2012 8:54 AM ET

With traders finally getting an opportunity to respond to Friday's disappointing jobs report, stocks are likely to see substantial weakness in early trading on Monday. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 122 points.

The downward momentum for the markets comes as the Labor Department's monthly employment report, released while the markets were closed last Friday, showed much weaker than expected job growth in the month of March.

The report showed that non-farm payroll employment increased by 120,000 jobs in March, while economists had expected the addition of about 201,000 jobs

Despite the weaker than expected job growth, the unemployment rate unexpectedly edged down to 8.2 percent in March from 8.3 percent in February. With the unexpected drop, the unemployment rate fell to its lowest level since coming in at 7.8 percent in January of 2009.

However, James Knightley, senior economist at ING, noted that the drop in the unemployment rate was "only caused by the size of the workforce falling by less than the drop in the number of people unemployed, with household employment down 31,000."

The disappointing jobs data is likely to inspire some traders to cash in on the strong upward move seen over the past few months, potentially triggering the correction that many analysts have been calling for.

In corporate news, shares of AT&T (T) are likely to be in focus after the telecom giant announced that it has agreed to sell its AT&T Advertising Solutions and AT&T Interactive units to an affiliate of Cerberus Capital Management.

Under the terms of the agreement, AT&T will receive a 47 percent equity interest in the new entity, YP Holdings LLC.

AOL Inc. (AOL) may also attract attention after announcing an agreement to sell over 800 of its patents and their related patent applications to Microsoft (MSFT) for more than $1 billion. The company said it intends to return a significant portion of the sale proceeds to shareholders.

Stock showed a lack of direction throughout the trading day last Thursday, with some traders looking to get a head start on the long weekend. Uncertainty ahead of Friday's monthly employment report also contributed to the choppy trading.

The major averages bounced back and forth across the unchanged line, eventually ending the session mixed. While the Nasdaq rose 12.41 points or 0.4 percent to 3,080.50, the Dow edged down 14.61 points or 0.1 percent to 13,060.14 and the S&P 500 slipped 0.88 points or 0.1 percent to 1,398.08.

Meanwhile, the major averages all moved lower for the holiday-shortened week. The Dow fell by 1.1 percent, while the Nasdaq and the S&P 500 dropped by 0.4 percent and 0.7 percent, respectively.

In overseas trading, stock markets across the Asia-Pacific region moved lower on Monday, although several markets were closed for public holidays. Japan's Nikkei 225 Index fell by 1.5 percent, while China's Shanghai Composite Index dropped by 0.9 percent.

Meanwhile, the major European markets all remain closed on the day amid a continuation of the long holiday weekend.

In commodities trading, crude oil futures are sliding $1.52 to $101.79 a barrel after rising $0.29 or 0.3 percent to $103.31 a barrel in the week ended April 5th. Gold futures, which fell $41.80 or 2.5 percent to $1,630.10 an ounce last week, are climbing $16.70 to $1,646.80 an ounce.

On the currency front, the U.S. dollar lost 1.5 percent against the Japanese yen last week before ending at 81.64 yen, while the greenback rose 2.1 percent versus the euro to $1.3098. The dollar is currently trading at 81.40 yen and is valued at $1.3071 against the euro.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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