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FRIDAY's jobs report dragged down stocks for another weekly loss and hinted that the US economic expansion and bull market may be close to an end.
The slowdown of the US labour market is another sign that the American economy will struggle in a world of rock-bottom oil prices and sky-high US dollar valuation. Financial pundits and central bankers had long argued that the US would be spared the worst of the commodities and currency crashes. Now, many are warning that US growth is in imminent danger.
Only 151,000 jobs were added to payrolls by employers in January, and weekly jobless claims showed a marked increase in the number of layoffs. Taken in aggregate, recent labour-market data suggests that the oil companies and machinery makers who had held onto employees in the hopes that the commodities bust was short-lived, are now finally throwing in the towel and letting workers go in large numbers.
"There were a lot of Wall Street guys running around a year ago, (telling oil executives) that every time oil prices fell, they would come back quickly," said Steve Chiavarone, portfolio manager at mutual-fund firm Federated Investors. "I believe oil companies did a lot more furloughing than firing, a lot more siloing (or storage) of oil than hedging. Now, they believe it's going to be low till the end of days. That could put some pressure on Texas and Denver housing and the employment situation ... those are at risk."
The new byword on Wall Street is: "lower for longer."
In a research note last week, analysts at brokerage Citigroup warned of a "negative feedback loop" in the global economy it dubbed "Oilmageddon". The US dollar rises, weighing down the price of oil and stressing finances in emerging markets; demand slows in emerging markets and investment dries up, hurting oil prices and currencies further; that drives up the US dollar again, perpetuating the vicious cycle.
Analysts at Morgan Stanley, meanwhile, studied the implications for global markets of oil being "lower for longer". Defaults on high-yield bonds in the US are set to rise, and become very prevalent among energy-industry borrowers, they warned. For now, however, the Morgan Stanley analysts said other sectors, such as big banks, were being judged too harshly on their ability to digest losses from energy clients.
There are already signs of knock-on effects in US data outside the labour market and high-yield bond markets.
For months, investors had hoped the weakness in the US economy was limited to the companies directly exposed to China, oil and other commodities.
Sure, they said, miners such as Freeport-McMoRan and machinery makers like Caterpillar are in dire straits, but look at the growth rate of services companies like American Airlines and Alphabet, the company formerly known as Google.
Last week, American posted robust earnings growth, helped by savings on fuel. But the largest US carrier by traffic also warned that its revenue per-seat was likely going to continue a downward slide. That's because fuel prices have increased the number of planes in the air, driving ticket prices down.
Google's earnings in late January propelled Alphabet to the position of the largest company in the world by market capitalisation. But the glory was short-lived. When the head of Google's thriving search business quit, Alphabet's shares lost more than 8 per cent in the next three days. Those losses were a reminder of the ephemeral nature of success in Silicon Valley.
That moral was even more starkly illustrated by LinkedIn's Friday earnings report, where it warned it would have to change its approach to rediscover high growth rates. One of the stars of "Internet 2.0", the venture capital and stock-market rush that also made Facebook one of the largest companies in the world, LinkedIn was not supposed to be vulnerable to economic slowdowns.
According to the bulls, oil's crash was supposed to spur growth in the services sector, which would offset weakness elsewhere. Apparently not. The Institute for Supply Management's data survey for January showed the rate of growth in services industries slowing. The services data could be an aberration but, coming on top of the decline in industrial activity, central bankers will monitor it carefully, said Robert Kaplan, president of the Federal Reserve Bank of Dallas.
Mr Kaplan refused to be drawn on whether his concern about weaker data would influence his position on future rate hikes, but he did say central bankers were in a "watchful waiting" mode.
"We know manufacturing is already in recession," said Mr Chiavarone, of Federated. "The questions is, in that tale of two economies, is the services sector holding up its side?"
It's getting much harder to find a bullish stock strategist. The few that remain optimistic sound a bit like they did in 2007 and 2008. Back then, the bulls started by boldly claiming only a handful of banks and builders would be sucked under by the correction in US housing markets. As the pain spread, bullish strategists back then retreated to the sectors they saw as removed from the US housing market, such as commodities producers and multinational tech companies. In the end, no one was safe.
One difference this time round is that there is no massive financial entity holding all the hedges for oil companies the way that American International Group held all the hedges for speculators on mortgage markets, explained Mr Chiavarone. Still, he added that his firm is on watch for recession signs for the first time in years.
For now, central bankers and market strategists are watching US data like doctors in an intensive-care unit watching the chart lines of a cardiogram.
The bull market is in critical condition. Another drop for oil this week might just kill it off.
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