Jobs Report Pushes Dow Down 30.19 : Market Overview
* Dismay over an unexpectedly weak jobs report and the Federal Reserve’s failure to lower interest rates set off selling in the stock market. The Dow Jones industrial average fell 30.19 points, or 0.9%, to 3,225.40, cutting its gain for the week to 2.01 points.
* Bond yields eased despite the Fed’s inaction. The dollar declined sharply after release of the unemployment data.
Stocks
Stocks began to look to the Fed for encouragement after the Labor Department reported that unemployment had held at 7.1% in January, but non-farm payroll employment declined by 91,000 jobs, surprising many analysts who had been estimating a modest increase.
But at midday the central bank signaled through its activity in the money markets that it was not ready to ease interest rates again.
Stock prices, which had been bouncing around uncertainly, then sold off sharply before recovering a bit in late trading. At its lowest level of the day, the Dow was down almost 50 points.
In the broader market, declining issues outnumbered advances by 7 to 5 on the New York Stock Exchange. Volume on the Big Board came to 231.04 million shares, down from Thursday’s 242.05 million.
Many analysts said the market still expects interest rates to come down in the months ahead, and that belief helped spark late buying.
Among the market highlights:
* The selloff was led by consumer stocks. Tobacco issues fell after a federal judge ruled that confidential tobacco industry documents must be made available to the plaintiff in a lawsuit. Philip Morris tumbled 2 1/4 to 75 3/4, UST lost 3/4 to 30 1/2, and Loews fell 1 5/8 to 107 1/4.
* Many drug and biotech issues also were weak. Merck fell 2 1/2 to 153 1/2, Johnson & Johnson dropped 1 7/8 to 106 1/8, and Immunex slid 4 1/4 to 59 1/4. Analysts lowered their estimates on Immunex after it posted nearly flat sales of its Leukine white blood cell stimulant in the fourth quarter.
* Despite disappointment over interest rates, many home builders’ stocks rose on optimism that a housing recovery remains underway. Presley jumped 1 3/8 to 15 7/8, J. M. Peters gained 1 to 4 1/4, and Ryland added 1/4 to 27 3/8.
* Many industrial stocks, also sensitive to the economy, defied the short-term gloom. Cummins Engine rose 1 1/2 to 59, steelmaker Quanex gained 1 to 28 1/2, and Alcoa added 1/2 to 64.
* Lockheed soared 1 7/8 to 43 7/8. Executives of the firm gave an upbeat presentation on Wall Street, citing a record order backlog. They endorsed 1992 earnings estimates of $5.30 to $5.80 a share.
* Oil stocks gained on hopes for higher petroleum prices. Chevron rose 1 3/8 to 64 5/8, Mobil jumped 1 3/4 to 63 1/4, and Arco added 1 3/4 to 106 1/4.
* Intel rose 2 1/8 to 64 1/2. Merrill Lynch repeated a buy rating, citing indications that the company’s first-quarter orders and shipments of computer chips are running above expectations.
Overseas, prices finished lower on London’s Stock Exchange. The Financial Times 100-share average lost 17.1 points to 2,517.20. In Frankfurt, the DAX average rose 4.39 points to 1,685.52.
Tokyo stocks closed little changed. The Nikkei average ended up 2.20 points at 22,107.12.
Credit
Treasury bond yields fell sharply after the release of January’s job data, then inched up when the Fed didn’t ease rates.
The price of the Treasury’s bellwether 30-year bond was up 3/32 point, or 94 cents per $1,000 in face amount. Its yield, which falls when prices rise, was 7.755%. Yields on shorter-term bonds ended mostly lower.
News of economic weakness usually sends bond yields lower because it makes it more likely that the Fed will cut interest rates. Though the Fed balked Friday, many bond traders see lower rates ahead.
The federal funds rate, the rate on overnight loans between banks, fell to 3.88% from 4.0% Thursday.
Currency
The dollar fell “clearly on the disappointment over the (employment) figures,” said currency trader Richard Levine at Merrill Lynch Futures.
If economic weakness leads to further interest rate cuts, it will make dollar-denominated securities less attractive to investors, thereby diminishing their need for dollars.
In New York, the dollar slumped to 1.560 German marks from 1.577 Thursday and to 125.30 Japanese yen from 125.65.
Commodities
Energy futures jumped on the New York Merc on optimism that OPEC ministers might announce new production cuts at their Wednesday meeting. Light, sweet crude oil for current delivery rose 37 cents to $19.87 a barrel.
Gold for current delivery fell 70 cents to $355 an ounce on New York’s Comex. Silver was 2.6 cents lower at $4.19.
