Stocks Struggle to Shrug Off Europe

Stocks are going to have a hard time escaping Europe’s debt grip as Wall Street opens lower Thursday morning.

Stocks across Asia were mostly lower, with China’s Shanghai Composite closing at its lowest level in nearly three years. Japan’s Nikkei 225 lost 0.8% as the Japanese yen hit an 11-year high versus the euro, which is putting pressure on some big Japanese exporters, including Sony and Casio. Their goods become more expensive for people paying with euros.

European stocks are mostly lower. France was able to raise more than $10 billion in a bond auction with solid demand, but was forced to pay slightly higher interest rates. Concerns that Europe is unable to contain its debt crisis fast enough are still hurting stocks.

Stephen Guilfoyle, an economist with Meridian Equity Partners who trades at the New York Stock Exchange, nailed down some of those concerns in a morning email:

“German retail sales for November missed by a mile, eurozone industrial orders missed estimates, Greece needs an extra ton of dough, like pronto, Spain is cautioning its banks to set aside 50 billion more euros to guard against bad loans.  Am I done? No!  Yields for Hungarian 12-month debt are now approaching ten percent, up from less than 8% two weeks ago, and the Italian financial sector is getting whacked. “

The Labor Department will release the December nonfarm payrolls report tomorrow at 8:30 a.m. ET and analysts expect 150,000 jobs to have been created in the final month of last year, while the unemployment rate ticks up slightly.  In November, the unemployment rate surprisingly dropped to 8.6%.  That was a two and a half year low and a signal that the U.S. job market is showing signs of improvement.

Meanwhile, Fitch Ratings predicts more corporate bankruptcies this year. The size and number are expected to double, according to the ratings agency.  Retail and restaurants may be the hardest hit, and Sears Holdings (NASDAQ:SHLD) has already announced plans to close between 100 and 120 Sears and Kmart stores.

Retailing giant Macy's (NYSE:M) will close five Macy’s and four Bloomingdale’s stores that are underperforming.  Clearance sales will begin this weekend and run for 10 weeks and about 830 workers will lose their jobs. Macy's also raised its financial outlook and doubled its dividend.