Dow Drifts, Sags 2.5 as Jobs Report Leads to Jitters Over Credit
Stock prices showed little change today, faced with news of stronger-than-expected employment growth at the start of 1989.
The Dow Jones average of 30 industrials slipped 2.50 to 2,331.25, reducing its gain for the week to 8.39 points.
Advancing issues outnumbered declines by about 6 to 5 on the New York Stock Exchange, with 778 up, 634 down and 525 unchanged.
Big Board volume totaled 172.98 million shares, against 183.43 million in the previous session.
The NYSE’s composite index edged up .15 to 166.50.
The Labor Department reported this morning that payroll employment grew by 408,000 jobs in January, well above advance estimates on Wall Street. (Story, Page 2.)
That evidence of continued strong momentum in economic growth quickly increased expectations of further credit tightening by the Federal Reserve.
Dollar Rises
Traders’ fears of higher interest rates apparently were offset to a significant extent, however, by the dollar’s rise in foreign exchange after the report was issued.
A sustained rally by the dollar would stand to attract money from overseas into U.S. investments.
Brokers also said money managers who had been left behind in the market’s recent rally were still engaged in “catch-up” buying each time stock prices pulled back a bit.
Bond prices fell in early trading today as the Labor Department’s report on nonfarm jobs triggered concerns that the economy is expanding more rapidly than expected.
The Treasury’s benchmark 30-year bond fell 7/16 point, or about $4.40 per $1,000 face amount, at midday. Its yield, which moves in the opposite direction from its price, rose to 8.85% from 8.8% late Thursday.
The government report was viewed as an indication of rapid economic expansion, triggering some inflationary fears, analysts said. Trading was moderate over the course of the morning, with waves of heavy activity.
“The concern is that the Federal Reserve will have to push short-term interest rates higher to slow down the economy, so we’ve seen the market sell off a little bit,” said Steven A. Wood, an economist with BankAmerica Capital Markets Group in San Francisco.
The federal funds rate, the interest on overnight loans between banks, was quoted at 9 1/8%, up from 9% late Thursday.
