Factors in Today's Market Confidence

Steve Goldstein, London bureau chief at MarketWatch.com reported today that U.S. stock futures are lower as the US market is still nervous over EU Nation’s debt burdens among other news, such as the unemployment claims report and Dubai’s debt repayment.

Today the Euro continued its downturn from the $1.31 level reached in the aftermath of the EU-IMF 750 billion euro aid package, retreating below $1.26. To make matters worse, a $980 million payment that the Dubai property developer must make today is also bringing the sovereign debt crisis back into the spotlight, the British pound also moved lower after the U.K. reported a widening trade gap, oil futures dropped below the $75 a barrel, and even gold was mildly impacted, with futures falling $4 to $1,239 an ounce.  The entire MarketWatch article can be read here.

In an article written by Madelina Iacob, Forbes.com, she states that EU debt problems could cut US company’s profits. The prolonged period of slow economic growth that most analysts are predicting for Europe could also have a major impact U.S. companies with heavy exposure to the Euro zone. The austerity programs used to cut fiscal deficits in Greece, Spain and Portugal will reduce growth in those countries and limit demand from consumers and businesses. Since direct sales in Europe account for approximately 10% of overall revenues for S&P 500 companies, this could in turn have an impact on second half earnings.

Companies with the largest exposure to Europe are the most vulnerable. Industries such automobile manufacturing and materials, consumer durables, services, semiconductors, insurance and capital goods, food, beverage and tobacco are likely the most susceptible to this decrease in demand. Others sectors like household and personal products, pharmaceuticals and biotechnology would not be spared either. However, U.S. banks, telecommunications services, and transportation and utilities have less exposure to Greece, Portugal and Spain, putting them in far better shape to withstand a drop in sales overseas.

Perhaps even more worrisome than the negative impacts on U.S. corporations is that the austerity measures made necessary by the severe debt levels in the EU may be a preview of what's to come for the US. The entire Forbes.com article can be read here.

Associated Press writers Stephen Bernard and Tim Paradis reported on the U.S. job market. The stated that this week’s jobs report showed that gains in the job market are proceeding slowly. First-time claims for jobless benefits dipped to 444,000 last week from an upwardly revised 448,000 the previous week. This is the fourth straight week of decline in claim; however, it hasn't been enough to signal sustainable job growth. Economists estimate weekly initial claims need to fall below 425,000 to show employers are consistently adding workers. Claims have stalled around the 450,000 level throughout the year.

High unemployment remains a major obstacle to a strong recovery. The unemployment rate jumped to 9.9 percent last month, even though employers added 290,000 jobs. Investors want to see consistent job creation as well as regular declines in claims for jobless benefits before becoming confident that the labor market is healing. The AP article can be read here.