Recession worries, soft retail sales set somber tone into jobs report

Small-cap stocks fell hard today as recession fears and sloppy retail sales kept the market on the defensive ahead of Friday’s big employment report. The Russell 2000 (NYSE:IWM) shed 18.79, or 3.65% to 495.84, losing nearly 10% in the first two days after the U.S. presidential election. For the year, the Russell is now off 35%, while the Dow is down 34% and the S&P 500 is down 38%.

The market was already reeling overnight when tech bellwether Cisco Systems Inc. (Nasdaq:CSCO) beat the earnings forecast but warned that revenues could fall hard quickly. As the day progressed, Cisco remained under pressure, but tended to outperform the indices. The bulls got a brief reprieve this morning when European bankers slashed interest rates, but the lift from that news didn’t have much shelf-life for U.S. equities.

Of course, it didn’t help matters that yet another economic report reflected a gloomy situation on the employment front — especially a day ahead of the Labor Department monthly reading on payrolls. After awful data earlier this week on manufacturing and service sector activity, this week’s unemployment claims came in above expectations, but the most sobering statistic was that continuing claims rose 122,000 to 3.84 million, the highest level in more than 25 years. A rush of dreadful economic data in recent days sets the stage for the “Grandaddy of Data” (yeah, Friday’s jobs report) to extend the glum reading of the nation’s economic picture. Esteemed researchers at Goldman Sachs already lowered their previous forecast for Friday’s non-farm payrolls — they are now predicting that a jolting 300,000 people lost their jobs last month (the consensus forecast is minus 180,000). Goldman also is looking for the unemployment rate to jump to 6.4%, up 0.3% from last month.

And just to reinforce the recession worries, same-store retail sales numbers came flooding in today; although there were some companies that did well, the cumulative total slumped to the worst monthly reading in about a decade as we head toward the crucial holiday spending period. A monthly confidence survey among corporate CEOs slumped to a record low when it was published this afternoon. The . . .

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