Dow Plunges 53.76 to a Six-Month Low : Jobs Report, Lack of Fed Action on Interest Rates Rattle Market

Blue chip stocks fell to their lowest level in nearly six months on Friday as investors were staggered by reports showing persistent weakness in the economy and by doubts over whether the Federal Reserve will push interest rates lower.

The Dow Jones industrial average tumbled 53.76 points or 1.7% to 3,200.61, its lowest close since 3,181.35 on April 8.

It was also the Dow’s biggest single-day loss since a 61.94-point decline on April 7. While the blue chip barometer managed to close above the 3,200 level, some analysts believe that it may not hold for long.

Meanwhile, Treasury bond yields rose slightly, also amid concern over the absence of Fed easing.

Analysts said stock investors were dismayed over the September jobs report, which showed a slight decline in the unemployment rate to 7.5% despite a loss of 57,000 jobs last month.

While the jobs data fell short of the bleakest forecasts, the report did not dispute the view of an economy in distress.

Investors were discouraged by the Fed’s failure to cut interest rates again, as had been widely expected. Some speculated that the Fed will act Tuesday, when its policy making committee meets.

Separately, the Commerce Department said new factory orders fell 1.9% in August, the sharpest fall in eight months.

Trading volume on the New York Stock Exchange was moderate at 188.03 million shares. But the number of falling stocks swamped winners 1,308 to 439, a powerful measure of investors’ dismay. The worst-hit stocks were industrial issues whose fortunes are closely tied to the economy.

“The market is just demoralized,” said Gerald Simmons, trader at Interstate/Johnson Lane. “You continue to see disappointing earnings estimates. There’s no evidence the economy is doing better.”

The August unemployment rate had been 7.6%. However, the Labor Department revised the payroll loss in that month to 128,000 from a previously reported 83,000. It also said that when the impact of a government summer jobs program is taken out of the calculations, the economy gained 40,000 jobs in September but lost 206,000 in August.

Investors sold stock throughout the day, but the selling intensified near the session’s end.

Analysts said Ross Perot’s re-entering the presidential race had limited impact on the market but that it was an added uncertainty.

For the week Dow lost 49.71 points.

Among the day’s highlights:

* Broader market indexes suffered smaller declines than the Dow. The NASDAQ composite index of smaller stocks lost 6.70 points or 1.2% to 571.63. The NYSE composite sank 1.3%.

* While major industrial stocks led the decline, lesser-known industrials also suffered. Timken lost 3/4 to 24 1/8, Varity fell 5/8 to 20 1/8, Owens-Corning lost 1 to 30 1/2, and Inland Steel gave up 3/4 to 17 3/4.

Also, Stanley Works tumbled 6 to 34. The manufacturer of hand tools and home-improvement products said it expects a 10% to 15% drop in third-quarter earnings. It also ended a court fight with Newell Co. that removed a takeover threat.

* Health care stocks, which have plunged over the last few weeks, came under new fire. U.S. Surgical dropped 4 3/8 to 59 1/8, hitting a 15-month low after the company failed to issue an estimate of third-quarter sales. That suggested to analysts that the quarter was weaker than expected.

Other health care losers included Merck, off 1 1/8 to 43; Lilly, off 1 1/2 to 60 5/8; Tokos Medical, down 1 1/4 to 18 3/4; Biomet, off 1 3/8 to 14 3/8, and Amgen, which fell 1 1/4 to 60.

* JWP fell 3 1/8 to 3 7/8, posting one of the day’s most severe percentage declines. The technical services company estimated a loss of 50 cents a share for the third quarter and said its president resigned.

Overseas, London’s Financial Times 100-share index closed down 22.6 points to 2,549.7. In Frankfurt, the DAX index fell 5.99 points to 1,478.04. In Tokyo, the Nikkei average was down 45.84 points, or 0.26%, to 17,324.07.

One bright spot: The Mexico City market’s Bolsa index jumped 30.60 points, or 2.3%, to 1,389.72, bringing the week’s gain to 137.62 points--the biggest weekly rise this year. Analysts said domestic and foreign investors were bargain-hunting.

Credit

Bonds yields inched up on the lack of Fed action to cut rates, but yields began to fall back late in the day. By the close the Treasury’s 30-year bond had lost about 94 cents per $1,000. Its yield was at 7.33%, versus 7.32% Thursday.

The bond market had rallied sharply Thursday in the hope that the Fed would lower interest rates after the release of the jobs report.

The federal funds rate was quoted at 3.13%, down from 3.75%.

Currency

The dollar was mostly lower on news of a still-weak U.S. economy.

The dollar also was hurt by the German central bank’s refusal to cut interest rates Friday, which lent support to the deutsche mark.

The dollar slumped to 1.401 marks in New York from 1.422 Thursday. It also fell to 119.35 Japanese yen from 119.80.

Commodities

Corn futures prices fell to their lowest point in more than four years ahead of a weekend that promised superb weather for harvesting what could be the biggest U.S. corn crop ever.

Corn for December delivery fell 2 1/2 cents to $2.11 1/4 a bushel.

Elsewhere, gold for current delivery rose 60 cents to $348.10 an ounce on New York’s Comex. Silver rose 2 cents to $3.76.

Light, sweet crude oil for November rose 9 cents to $21.92 a barrel on the New York Merc.

Market Roundup, D6

DIP IN UNEMPLOYMENT: The national unemployment rate fell slightly to 7.5% despite a loss of 57,000 jobs last month. A1

BUNDESBANK STANDS FAST: The German central bank refused to lower interest rates, a move considered essential to reviving economies. D2