Stocks Slide on Downbeat News on Jobs, Factories
Stocks fell Friday after reports showed that U.S. companies were still slashing jobs and that the manufacturing sector had not picked up as much as some investors had anticipated, casting doubt on the economic recovery. Oil prices surged to their highest level since June 11.
The Dow Jones industrial average fell 79.83 points, or 0.9%, to 9,153.97, and the broader Standard & Poor’s 500 index lost 10.16 points, or 1%, to 980.15. The technology-heavy Nasdaq composite index slid 19.40 points, or 1.1%, to 1,715.62.
Losers outnumbered winners by 5 to 2 on the New York Stock Exchange and by 2 to 1 on Nasdaq in active trading.
Early in the session, the government reported that the national unemployment rate fell for the first time in a year in July, but companies slashed workers from their payrolls for a sixth straight month.
The Institute for Supply Management’s July survey of the U.S. manufacturing sector, though in line with analysts’ estimates, disappointed investors, who had hoped that the survey would show a stronger pickup in the factory sector, market experts said.
“I do think the economy is recovering, but ... I think a lot of traders are thinking it may not be recovering as fast as we were all hoping,” said Peter Dunay, chief market strategist and options specialist at brokerage Wall Street Access. “The way the market moved up, it’s either going to have to sit here for six months and wait for the earnings to come up or pull back a little.”
Yields on Treasury securities, which have rocketed in recent weeks, initially climbed on the news, but yields on longer-term securities later retreated. The yield on the benchmark 10-year T-note hit a one-year high in the morning but closed at 4.38%, down slightly from Thursday’s close of 4.40%.
Investors worry that sharp gains in bond yields and U.S. interest rates will pump up borrowing costs and derail the economy’s fragile comeback.
“I think the bond market may be the place to watch for the next move,” Dunay said. “If it hits 5% on the 10-year, that could draw money and push equities down. And if they start pushing the yield back to 4%, it might help money go back into equities.”
Oil prices spiked to their biggest one-day gain in four months after an attack on an Iraqi pipeline spurred concern that sabotage will keep hampering efforts to restore the country’s oil production to prewar levels.
The blast late Thursday was at least the sixth strike on an Iraqi pipeline in two months, Agence France-Presse reported. The country’s oil output has lagged behind forecasts because of attacks and looting of hardware. Iraq in February produced about 3% of the world’s oil.
“Any flow of oil from Iraq will be inconsistent and unpredictable,” said Michael Guido, associate director for hedge fund marketing at Barclays Capital Inc. in New York.
Crude oil for September delivery surged $1.77, or 5.8%, to $32.31 a barrel on the New York Mercantile Exchange.
In other highlights:
* J.P. Morgan Chase led a broad slide in bank and brokerage stocks as the bond market’s upheaval forced analysts to question the future of recently strong trading profits. Financial sector stocks are among the most sensitive to rising interest rates. J.P. Morgan shares fell $1.69 to $33.36, making it the Dow’s biggest percentage loser. Citigroup sank $1.35 to $43.45.
* Johnson & Johnson slipped $1.36 to $50.43 after Merrill Lynch downgraded shares of the No. 1 maker of medical devices.
* Gold prices fell for a fourth day, sliding $7.90 to $346.10 in New York trading.
