Stocks fall as unemployment rises
Investors unnerved by a larger-than-expected jump in unemployment sent stocks lower today, taking profits from Wall Street’s two days of rallies.
But news of surprisingly strong growth in the nation’s service sector helped offset the losses.
While economic data have been turning more positive, disappointments like the jobless rate prompt investors to question whether stock prices, earnings and the economy will recover in the second half of 2003. So far, however, the sell-offs have not been steep or long lasting, which analysts say points to investors’ growing optimism.
The jobless report, “more than anything ... is a reason for the market to come down a little bit. I don’t think it is going to cause a tremendous sell-off. It is going to be one of those figures that causes investors to sell on for a few hours or a few days before moving forward again,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati.
The Dow Jones industrial average ended a shortened trading session at its low point of the day, falling 72.63, or 0.8%, to 9,070.21. The loss nearly halved the 157.40-point gain from the previous two sessions.
The broader market also retreated. The Nasdaq composite index fell 15.27, or 0.9%, to 1,663.46, following a two-day win of 55.93. The Standard & Poor’s 500 index declined 8.05, or 0.8%, to 985.70, having advanced 19.25 in the past two days.
Still, the gauges ended the week higher because of the buying that took place on Tuesday and Wednesday. The Dow ended the week up 0.9%, while the Nasdaq climbed 2.4% and the S&P rose 1%.
Trading was light today ahead of the Independence Day weekend and ended three hours early. The market is closed tomorrow.
“People are in their vacation mode. What (trades) you are seeing is profit taking before the long weekend,” said Stephen Carl, principal and head of equity trading at The Williams Capital Group.
The Labor Department’s report on June unemployment was a disappointment. The jobless rate spiked up to 6.4% last month, the highest level in more than nine years, or since April 1994, and the greatest since the September 11 terror attacks. That surprised analysts who had forecast a rise to 6.2% from May’s 6.1% rate.
The stock indexes briefly turned positive, however, after the Institute of Supply Management reported that its non-manufacturing index rose to 60.6 in June, the best level since September 2000. Analysts were expecting a reading of 55 for the index, which measures activity in the service sector. Any reading above 50 indicates expansion in activity.
Since mid-March, investors have been buying up stocks in the growing belief that such a recovery will happen and as a result the market’s major stock had a strong second quarter – the best quarter since 1998 for the Standard & Poor’s 500 index.
AT&T declined 46 cents to 19.42 after S&P cut the company’s credit rating by one notch to triple-B, saying the telecommunications service provider has a high long-term risk profile.
Knight Trading, a market maker in Nasdaq stocks, climbed 1.83 to 8.50 after raising its second-quarter earnings estimates well above analysts’ expectations.
Declining issues outnumbered advancers nearly 8 to 5 on the New York Stock Exchange. Volume was light at 746.32 million shares. Volume on Wednesday, when the market was open a full day, totalled 1.44 billion.
The Russell 2000 index, the barometer of smaller company stocks, fell 2.54, or 0.6%, to 456.35.
