Jobless Data Weigh on Stock Market
Stock prices fell and bond yields jumped Thursday as investors weighed conflicting reports about the health of the U.S. economy.
In an abbreviated trading session ahead of today’s Independence Day holiday, stocks fell sharply in the early going after the government reported an unexpectedly large jump in the June unemployment rate. A flurry of profit warnings also weighed on the market.
But stocks stabilized on a report that the service sector -- the biggest part of the U.S. economy -- improved in June. That news also boosted yields on government securities as fixed-income investors fretted that a strengthening U.S. economy would mean higher interest rates down the road.
The Dow Jones industrial average, which fell as much as 107 points in early trading, finished the session down 72.63 points, or 0.8%, at 9,070.21. The broader Standard & Poor’s 500 index fell 8.05 points, or 0.8%, to 985.70. The technology-laden Nasdaq composite index lost 15.27 points, or 0.9%, to 1,663.46.
Trading was light, with the market closing at 10 a.m. PDT. Declining stocks led advancers by about 3 to 2 on the New York Stock Exchange and by 9 to 7 on Nasdaq.
For the shortened week, the Dow was up 0.9%, the S&P; 500 rose 1%, and Nasdaq gained 2.4% -- its biggest advance in five weeks. The Dow and S&P; rose for the fifth week in six.
The market’s early-morning slide was exacerbated by a huge trading error in the Chicago Board of Trade’s mini Dow Jones futures contract. The board said later that it invalidated the erroneous trades.
But the news that the U.S. jobless rate surged to 6.4% last month to a nine-year high was the chief catalyst for the selling.
“The unemployment was an unmitigated disaster,” said Todd Clark, head of listed trading at Wells Fargo Securities. “Everyone thought the economy was starting to turn around or at least show some stability in the labor market, and it definitely didn’t do that.”
Several software companies took a hit after warning that earnings would miss analysts’ estimates. Business software maker Documentum fell $4.06, or 21%, to $15.69 after second-quarter profit and sales missed forecasts.
Parametric Technology, another software maker, fell 24 cents to $3.08 after warning it would post a wider third-quarter net loss and lower-than-expected revenue.
Other disappointing forecasts came from Boston Scientific, Tweeter Entertainment Group and Siebel Systems.
But Siebel, a business software maker, finished up 26 cents at $9.72 as investors welcomed the company’s plans to cut costs, an analyst said. Siebel received a rating upgrade from investment bank CIBC to “sector perform” from “underperform.”
The Standard & Poor’s application software index fell 1.7% and was among the top percentage losers of S&P; sectors.
The Institute for Supply Management’s report that its index of non-manufacturing activity surged in June pushed the yield on the 10-year Treasury note to 3.65% from Wednesday’s close of 3.54%.
In other highlights:
* Boeing dragged on the Dow industrials, losing 22 cents to $34.58. On Wednesday, the world’s largest aircraft maker said it delivered 74 commercial jets in the second quarter, down 34% from a year earlier, on weak demand from struggling airlines.
* Knight Trading Group, the biggest market-maker of Nasdaq-listed issues, surged $1.83, or 27%, to $8.50 after the company said second-quarter profit would be double its earlier forecast because trading picked up. Ameritrade Holding, the second-biggest shareholder in Knight, rose 46 cents to $7.88.
Market Roundup, C5-6
