Midday Market Update: Markets Down on Employment Worries | ETF Trends

The markets and exchange traded funds (ETFs) have pulled back on more economic worries that rises in the U.S. unemployment rate will thwart government efforts to stimulate growth.

The unemployment rate has hit a 25-year high, increasing to 8.5%, up from 8.1% in February. The economy lost 663,000 jobs and employers have handed out nearly 5.1 million pink slips since the start of the recession, the biggest slump in the post-war era, states Bob Willis of Bloomberg.

To make it even worse, the U.S. service industry shrank faster than expected in March.  The Institute of Supply Chain Management’s nonmanufacturing index dipped down to 40.8 from 41.6 in February.  Anything below 50 is indicative of a contraction.  What makes this employment down spiral so significant, is that it is even hitting the government workers, with the announcement of the U.S. Postal Service expected to close six offices and force 150,000 into early retirement.

So what has been done to alleviate this predicament?  President Barack Obama has signed into bill a $787 billion stimulus package, focused on the infrastructure sector, which is expected to boost employment numbers. But this will take time.  Additionally, world leaders at the G-20 summit have pledged to infiltrate the global marketplace with $1.1 trillion to help cushion the blow of the global recession.  Hopefully, a combination of the two will aid in finding a long-term solution to the employment debacle.

On a different note, an insider has noted that IBM (IBM) is planning to announce its purchase of Sun Microsystems (JAVA) later on this month.  IBM is expected to pay $9 to $10 per share for Sun, which would make it IBM’s largest acquisition in history.  If the deal goes through, IBM will grab close to half of global server-computer sales, Sun’s software portfolio and could possibly spark talks of more consolidation in the industry, state Kaite Hoffmann and Connie Guglielmo of Bloomberg.

An ETF that could be influenced if the deal is finalized is the iShares Dow Jones U.S. Technology Index (IYW), which is up 10.8% year to date; IBM is 10.7%.

The Dow Jones Industrial Average was down about 0.35%, the S&P 500 lost 0.4% and the Nasdaq dropped 0.17% in morning trading.

Kevin Grewal contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.