Consumer, Job Data Hit Stocks
Falling consumer confidence and a smaller-than-expected rise in new jobs sent stocks lower for a second session Friday, with downbeat earnings from Amazon.com saddling the technology sector. The major indexes each lost more than 1% this week.
A January upswing in job creation by the nation’s employers signaled that the economy was off to a good start this year, but the strength stoked fears about higher interest rates after the Federal Reserve gave no indication that Tuesday’s 14th consecutive increase would be the last.
Although the 193,000 jobs added last month came in below economists’ 250,000 estimate, upward revisions to November’s and December’s figures compensated for that shortfall, said Jack Caffrey, equities strategist for JPMorgan Private Bank.
Coupled with a surge in unit labor costs reported by the Labor Department on Thursday -- meaning companies are paying more for less productive workers -- the increased hiring was evidence of a growing economy and “puts back on the table that the Fed may not be done [raising rates] in March,” Caffrey said.
Crude oil futures built on earlier gains late in the session, helping widen stocks’ losses. A barrel of light crude rose 69 cents to $65.37 in New York trading.
The Dow Jones industrial average fell 58.36 points, or 0.54%, to 10,793.62. Inflation worries sent the Dow down 101 points Thursday.
Broader stock indicators also fell. The Standard & Poor’s 500 index sank 6.81 points, or 0.54%, to 1,264.03, and the Nasdaq composite index dropped 18.99 points, or 0.83%, to 2,262.58.
Bonds yields fell as their prices rose, with the yield on the benchmark 10-year Treasury note declining to 4.52% from 4.56% on Thursday.
Wall Street’s mood was muted further by a drop in the University of Michigan’s consumer sentiment index, which slid 2.2 points to 91.2. Economists had predicted a slight decrease to 93.1.
Investors also considered data from the Institute for Supply Management, which said Friday that the nation’s service sector grew again last month but at a slower pace than in December.
The major stock indexes tumbled this week as renewed uncertainty about inflation and interest rates haunted Wall Street. Generally strong fourth-quarter earnings reports helped prop up stocks somewhat, but disappointing results from Internet search engine Google weighed on the Nasdaq.
For the week, the Dow sank 1.04%, the S&P; 500 declined 1.53% and the Nasdaq was 1.81% lower.
In other market highlights:
* Amazon.com fell $4.41, or 10%, to $38.33. After the market close Thursday, the online retailer forecast 2006 operating profit of $370 million to $510 million, below the $636-million average estimate of analysts surveyed by Thomson Financial. Amazon.com also said fourth-quarter profit fell 43% on holiday discounts.
* The decline in Amazon.com helped push down shares of Google, the Internet search engine company, which slumped $14.49 to $381.56.
Sequoia Capital, a founding investor in Google, disclosed in a regulatory filing Friday that it reduced its stake last year by distributing more than $3 billion of Google shares to investors after a 150-fold return from the six-year investment. The Sequoia Capital VIII fund sliced its stake to 442,167 shares at the end of 2005, down from 16.4 million a year earlier.
* Honeywell International, which makes electronic controls, added 70 cents to $39.23 for the top gain in the Dow average. The stock was raised to “buy” from “hold” by Citigroup’s Jeffrey Sprague, the top-ranked electrical-equipment and multi-industry analyst by Institutional Investor magazine last year.
* Transocean, an offshore oil and natural gas drilling contractor, jumped $2.84 to $80.62. The company signed a three-year contract with Devon Energy that Transocean valued at $520 million to $775 million.
* Electronic Arts dropped 44 cents to $53.14. The video game publisher said after the bell Thursday that lower sales drove down its profit by 31% last quarter, missing already reduced estimates.
