Wall Street Banks, while Laying Off Middle Staff, Expect to Increase Compensations to Senior Executives

The Dow Jones tumbled more than 600 points yesterday as investors took profits on some of the mediocre January gains and as a disappointing December retail sales reiterated concerns about a odds of recession. Shares of banks profoundly underperformed.

The Dow Jones fell 1.81% to 33,297. The S&P 500 lost 1.56% to close at 3,929, its lowest level since Dec. 15. The Nasdaq Composite slid 1.24% to end the day at 10,957, snapping a seven-day win streak.

Today, the U.S. stock indexes opened lower on Thursday after the housing starts report disappointed, following yesterday's poor retail sales figures. The selloff spread across global markets, from Japanese shares to oil contracts as Treasuries rallied (read below).

The U.S. Labor Department just reported that the initial jobless claims for unemployment insurance fell to their lowest level since late June last week, signaling to investors that the labor market is resilient amid a slowing economy. Claims totaled a seasonally adjusted 190,000 for the week ending Jan. 14, a decline of 15,000 the previous period. Economists surveyed by Dow Jones expected a figure of 215,000.

According to Bloomberg, Wall Street is bracing for higher costs in coming months, especially labor costs. The Big 6 U.S. banks are expected to spend a combined $183 billion on compensation and personnel expenses this year. Bank of America is pausing hiring except for the most critical roles, and expects expenses to rise to $16 billion in the first quarter. At Citigroup, expenses for the year are likely to climb 6.7% to about $54 billion. Meanwhile, Wells Fargo (WFC) is planning to offer a whopping $1 billion in raises for staffers, which will push total expenses to $50.3 billion this year.

Asian markets also showed weakness earlier this morning following yesterday’s U.S. stats and Fed’s uncertainty. The Australian stock market is notably higher on Thursday, extending the slight gains in the previous session, with the benchmark S&P/ASX 200 moving above the 7,400 level to a 9-month high, with gains in miners partially offset by weakness in technology and energy stocks. The benchmark S&P/ASX 200 Index gained 0.57% to 7,435.30, after touching a high of 7,438.00 intraday.

New Zealand’s celebrity PM Jacinda Ardern announced her willingness to resign for a new leader within weeks, saying she doesn't believe she has the energy to seek re-election in the October polls. Speaking at a news conference, Ardern said her term would end by February 7, when she expects a new Labour prime minister will be sworn in -- though "depending on the process that could be earlier."