Larger than expected jump in jobless claims pushes futures lower. On Wednesday, the major market indices closed at multi-year lows with the Dow ($INDU) closing below 8,000. The concern now is that with prior support failing Wednesday, we could see more declines as stocks search for a new bottom. The fact that jobless claims were weaker than expected has kept the bears in control of futures. Overseas markets followed the lead of the U.S., with indices in Hong Kong and Japan seeing large declines and indices in Europe also lower.

With the major market indices breaking through prior support, stocks needed some positive news to bring in some buyers. However, jobless claims rose more than expected to a 16 year high, leaving traders in a selling mood. Jobless claims for the week ending Nov. 15 rose by nearly 30,000 to a level of 542,000. Expectations were for a mild decline to 505,000, so the news was very disappointing. Claims are now hitting highs not seen since the recession of the early 1990s.

Shares of Citigroup (C) saw their largest decline ever on Wednesday when the financial stock lost nearly 25 percent. The stock is continuing to decline in the pre-market despite news Prince Alwaleed plans on increasing his stake in the company to 5 percent. Citi shares closed Wednesday at $6.40, which is a price not seen in nearly 15 years.

Stocks have suffered large declines this week on concerns that the auto sector could fail. The Big Three automakers pleaded their case on Capitol Hill this week, but the feeling is that a bailout package isn’t likely to be passed for the sector in the near term. However, many analysts feel that General Motors (GM) might not make it through the end of the year without a cash infusion. Traders are also disappointed that Treasury Secretary Paulson and Fed Chairman Bernanke have changed plans for TARP monies and that half of the $700 billion will be preserved for the new administration.

One of the benefits of a fledgling economy is the sharp drop in oil prices. Crude moved below $50 briefly in overnight trading and is currently down nearly $3 to a price near $50.50 a barrel. It was only four month ago that crude hit record highs near $147 a barrel. This drop has translated into cheaper prices for gasoline at the pumps, but this positive has been more than offset by job losses, falling home prices and declines in the stock market.  

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site