Posted at 12:28 p.m., Friday, February 3, 2006
Stocks decline on jobs, consumer data
By CHRISTOPHER WANG
A January upswing in job creation by the nation's employers signaled that the economy was off to a good start this year, but the strength stoked fears about higher interest rates after the Federal Reserve gave no indication that Tuesday's 14th consecutive increase would be the last.
While the 193,000 jobs added last month came in below economists' 250,000 estimate, upward revision to November's and December's figures compensated for that shortfall, said Jack Caffrey, equities strategist for JPMorgan Private Bank.
Coupled with a spike in unit labor costs reported by the Labor Department Thursday meaning companies are paying more for less productive workers the increased hiring was evidence of a growing economy and "puts back on the table that the Fed may not be done (lifting rates) in March," Caffrey said.
Crude futures built on earlier gains late in the session, helping widen stocks' losses. A barrel of light crude added 69 cents to settle at $65.37 on the New York Mercantile Exchange.
At the close of trading, the Dow Jones industrial average fell 58.36, or 0.54 percent, to 10,793.62. Inflation worries sent the Dow down 101 points Thursday.
Broader stock indicators also fell. The Standard & Poor's 500 index sank 6.81, or 0.54 percent, to 1,264.03, and the Nasdaq composite index dropped 18.99, or 0.83 percent, to 2,262.58.
Bonds recovered from an early decline, with the yield on the 10-year Treasury note slipping to 4.53 percent from 4.56 percent late Wednesday, but the yield curve remained inverted as the two-year note lingered at 4.58 percent. The inversion connotes a lack of short-term confidence and, the market believes, typically precedes an economic downturn.
Meanwhile, the U.S. dollar was mixed against other major currencies, while gold prices edged higher.
Wall Street's mood was muted further by a drop in the University of Michigan's consumer sentiment index, which slid 2.2 points to 91.2. Economists had predicted a slight decrease to 93.1.
Investors also mulled data from the Institute for Supply Management, which on Friday said the nation's service sector grew again last month but at a slower pace than in December.
The major stock indexes tumbled this week as renewed uncertainty about inflation and interest rates haunted Wall Street. Generally strong fourth-quarter earnings reports helped prop up stocks somewhat, but disappointing results from Internet search engine Google Inc. weighed on the Nasdaq.
For the week, the Dow sank 1.04 percent, the S&P 500 declined 1.53 percent and the Nasdaq was 1.81 percent lower.
Michael Sheldon, chief market strategist for Spencer Clarke LLC, said Friday's losses may have been limited by the market's hopes that the Fed is still near the end of its rate tightening, though Wall Street could see more volatility in the coming weeks.
"February has historically been a lackluster month for the stock market," Sheldon said. "Despite many positive corporate earnings reports, investors should be prepared for some choppy or sideways trading over the near term."
Home appliance maker Maytag Corp. posted a wider fourth-quarter deficit after higher costs ate away from sales growth. Maytag lost 51 cents to $17.51; Whirlpool, which is buying Maytag, rose 24 cents to $86.61.
Web retailer Amazon.com said late Thursday its quarterly earnings plunged 43 percent despite higher sales as it continues to invest heavily in technology and marketing. Amazon.com sank $4.41 to $38.33, and Google was down $14.49 at $381.56.
Electronic Arts Inc. on Thursday said lower sales drove down its profit by 31 percent last quarter, missing already reduced estimates. The video-game publisher's shares dropped 44 cents to $53.14.
Fast-food chain Wendy's International Inc. reversed a year-ago loss to post a modest quarterly profit, although sales at its flagship restaurants open at least a year fell for the first time in 18 years. Shares slipped 22 cents to $58.17.
ConAgra Foods Inc. said it plans to sell its refrigerated meats business, which employs about 6,000 at 15 plants and generated $1.9 billion of sales last year. ConAgra added 41 cents to $21.15.
Declining issues led advancers by 5 to 3 on the New York Stock Exchange, where volume of 1.37 billion shares lagged the 1.5 billion shares changing hands at the same point Thursday.
The Russell 2000 index of smaller companies fell 2.03, or 0.28 percent, to 724.22.
Overseas, Japan's Nikkei stock average dropped 0.3 percent. Britain's FTSE 100 rose 0.21 percent, Germany's DAX index gained 0.13 percent and France's CAC-40 was higher by 0.2 percent.