Business Report Plus: What’s happening on Wall Street?

Rhonda Schaffler, Correspondent | February 2, 2018
  • The Dow Jones Industrial Average had the biggest one-day point drop since 2008.
  • Government monthly employment reports show 200,000 new positions were added in January.
  • Retail layoffs continue in the Garden State.
  • The state Treasury Department is moving forward with creating a state-run 401k plan.
  • Lawmakers hear concerns regarding Gov. Phil Murphy’s idea for a state-run bank.
  • Amazon announced a partnership with JP Morgan and Berkshire Hathaway to come up with a plan to reduce health care costs.
  • Merck, ADP and Prudential Financial made Black Enterprise’s list of 50 Best Companies for Diversity.
  • TerraCycle got a street named after it in Trenton.

Friday was National Wear Red Day, designed to raise awareness of heart disease risks. Apparently Wall Street got the memo, as a massive selloff on Friday left a sea of red arrows everywhere. The Dow Jones Industrial Average fell nearly 666 points, the biggest one day point drop since 2008.

Weeks like this can make investors nervous. So what’s going on? Blame rising interest rates. Higher interest rates make it more expensive for businesses and consumers to borrow money, and that can lead to a pull back in spending, which in turn, can slow the economy. Economists believe rates will continue rising this year.

Sometimes when interest rates rise, investors will also move their personal investments out of stocks and into fixed income investments like bonds, which are considered less risky and typically less volatile. Of course, the stock market until recently has been moving up in nearly a straight line, so experts are never surprised when stocks pull back after a long stretch of gains. Friday’s drop in the Dow amounted to a decline of just over 2.5 percent, which historically is not a lot. Even after the drop, the Dow is still up more than 27 percent over the past year.

The Wall Street downdraft stole the headlines from what was a very piece of good news on Friday, and that’s job growth. The government’s monthly employment report showed that 200,000 new positions were added in January. That was better than forecast, and more importantly, wages saw their biggest jump since 2009 — up 2.9 percent in the past year. The nation’s unemployment rate stands at 4.1 percent.

Meantime, Roseland-based ADP, which issues its own monthly report on employment, reported that 234,000 new jobs were added in January. ADP’s report typically differs from the government’s report, but what’s important is that they are both showing the same trends.

Unfortunately the job news in New Jersey this week focused on more retail layoffs. Walmart is closing a store in Readington, Hunterdon County, which could result in nearly 150 layoffs. That’s on top of recent announced closings of three New Jersey Sam’s Clubs and the JC Penney store in Westfield at Garden State Plaza, which will result in hundreds more out of work. It’s hard to see how the retail industry will revive itself this year.

In the flurry of activity in Trenton this week, two business-related items were on the agenda. At a hearing of the Assembly Financial Institutions and Insurance Committee this week, Republican lawmakers raised concerns about Gov. Phil Murphy’s idea for a state-run bank for New Jersey. According to GOP lawmakers, potential risks include political influence in lending decisions. Advocates for a state-run bank say it would require much needed access to capital. These are early days, we’ll see where it goes.

Meantime, the State Treasury Department is moving forward with creating a state-run 401k plan, according to NJBiz, and is reviewing proposals submitted by financial institutions. This comes after Gov. Chris Christie signed a law in 2016 to create a supplemental 401k plan for employers with 100 or fewer workers in the state. Once the Treasury Department reviews all the proposals it’s received, a short list of possible financial companies will be announced in the next few months.

Hands down the most interesting story in the business world this week came on Monday, when Amazon announced a partnership with two big financial companies — JP Morgan and Berkshire Hathaway — to come up with a plan to reduce health care costs. Analysts are trying to figure out exactly what that means, because the companies were short on specifics, other than saying their first goal is to target technology solutions to simplify the health care system. The CEOs of the companies involved, Jeff Bezos, Jamie Dimon and Warren Buffett, are among the most admired CEOs in the U.S. You can bet people are eager to hear about where this idea goes.

Some kudos for New Jersey companies this week: Merck, ADP and Prudential Financial are on the 50 Best Companies for Diversity list, put out by the magazine Black Enterprise.

Atlantic Electric says its customers experienced the lowest number of electric outages in the company’s history after the company spent hundreds of millions of dollars in recent years to modernize its electric distribution system.

And TerraCycle, which recently got approval to accept investments from the general public, got a street named after it in Trenton.