Dow Off 16.08; Caution Rules Day
The stock market extended its broad losing streak to a second day Thursday as investors worried that a strong employment report due out today might drive U.S. interest rates higher.
“The market had no fight in it,” said Prudential-Bache Securities analyst Larry Wachtel. “The entire day was spent just waiting for that employment number.”
The Dow Jones industrial index fell 16.08 points to 2,020.23 after losing 22.05 points on Wednesday.
Declining issues outnumbered advances by about 5 to 3 in New York Stock Exchange-listed trading, and Big Board volume rose to 171.84 million shares from Wednesday’s 141.32 million.
Two large blocks of General Motors stock, traded before the auto maker’s ex-dividend date today, accounted for 24 million shares, traders said.
“With so much uncertainty about what this employment number is going to do to the markets, I am squaring my positions ahead of Friday,” said a trader, who asked not to be identified.
“Friday is probably going to be the day that makes this whole week and maybe that determines this market’s trading range for awhile,” he said.
The Labor Department is scheduled to report today on the unemployment situation for April. Economists generally expect the data to show continuing job gains.
Analysts say investors may well respond negatively to any evidence of increasing strength in the economy, interpreting it as a portent of mounting inflationary pressures and an upward influence on interest rates.
“A rise of 300,000-plus jobs would be very unfriendly to Wall Street,” Wachtel said. “Anything below 200,000 would be very friendly. But if it comes in at the consensus of 255,000, who knows how people are going to react?”
Wall Streeters reason that the Federal Reserve is likely to give the employment figures considerable weight in deciding whether or when to tighten its credit policy.
Yields on long-term Treasury bonds have lately been hovering around 9%. If they were to go much higher, brokers say, they would stand to pose a formidable competitive threat to stocks.
In foreign trading share prices on the London Stock Exchange dropped as the market fell victim to declining prices on Wall Street.
The Financial Times 100-share index closed down 5.2 at 1,789.5.
The Tokyo Stock Exchange was closed for a holiday.
