Market Summary: Mon. Jan. 26, 2009

Something I noticed today that was not talked about too much in the news was the significant amount of job cuts announced.

1)      Home Depot will lay off about 7,000 workers (2% of workforce), and it will exit its EXPO business.

2)      Caterpillar will eliminate 20,000 jobs (almost 18% of workforce).  The company also reported earnings that missed expectations.  Q4 net income was $1.08 per share (compared to $1.50 per share a year earlier) while analysts were expecting $1.30 per share.   

3)      Sprint Nextel will cut 8,000 jobs (about 15% of workforce).  The job cuts will save the company about $1.2 billion each year.

4)      GM will cut 2,000 jobs (3% of 64,000 employees) at plants in Ohio and Michigan.  The last time GM made a profit was in 2004 when the company employed 111,000 workers.

5)      Deere will cut about 700 jobs (just over 1% of workforce) at factories in Brazil and Iowa.

6)      ING, a Dutch financial company, will lay off 7,000 workers (about 5.5% of workforce).

7)      IBM reported that it eliminated 1,400 sales jobs (about 3.5% of workforce) last week.

Companies are going to great lengths to lower costs and the easiest and fastest way is to reduce the number of employees.  Obviously, these companies are behind the curve, but I look at it as a positive sign. 

I became much less bearish on my outlook for the economy and the stock market after I attended University of Illinois’ town hall meeting where the school’s budget and plan to cut cost and over the next few years was discussed.  It takes a great deal of time for large institutions to make changes (especially financial ones), and when these big institutions finally realize they need to make changes the worst is already behind them.  In no way am I saying that the economy will bounce back and the stock market will zoom higher, but for now, people know things are bad and they are finally making the appropriate decisions to deal with the stagnant economy.