Stocks end mixed on jobs, services data

Times Staff Writer

The stock market seemed to dodge a couple of bullets Thursday, but the Dow Jones industrial average’s modest rebound during a half-day session couldn’t salvage the week.

And take a guess which commodity closed at yet another record high.

The Dow added 73.03 points, or 0.6%, to 11,288.54, but lost 0.5% for the week and stayed in bear-market territory, off 20.3% from its October record high.


The broader market was much worse, for the day and the week. Investors continued to unload some of the stocks that held up best for them in the second quarter, particularly smaller issues. The Russell 2,000 small-stock index lost 1% on Thursday and 4.6% for the week, and is down 22.2% from its all-time high reached nearly a year ago.

The slow-motion crash in bank stocks also continued, suggesting no easing of the latest jitters over the financial system. On the list of fresh multiyear lows Thursday: Bank of America, Wachovia, Comerica and Zions Bancorp, among others.

Although an index of activity in the service sector fell more than expected, the government’s report of a net loss of 62,000 jobs in the economy in June nearly matched expectations, so that was a relief to some on Wall Street.

Should it have been? The debate over whether we are, or aren’t, actually in a recession will go on, but to some analysts there’s no question anymore.

Merrill Lynch & Co. economist David Rosenberg says the lesson from history is that “you don’t have six consecutive monthly declines in payrolls and not be in an outright recession.”

For stock investors, the issue is what the slowdown or recession will mean for corporate earnings. Analysts have a dismal view of results for the quarter that just ended: Operating earnings of the Standard & Poor’s 500 companies overall are expected to be down 12.4% from a year earlier, according to Wall Street estimates tracked by Thomson Reuters.

Yet those same analysts still believe the second half will bring a big turnaround. They’re expecting a 12.7% year-over-year gain in S&P; 500 earnings in the third quarter.

But you have to wonder what will happen to that third-quarter estimate if oil stays where it is, or goes higher. Near-term crude futures in New York jumped $1.72 on Thursday to a record $145.29 a barrel.

Not even a surprise rally in the dollar -- normally a drag on commodity prices -- could keep oil from doing what it does best: defying everyone who’s trying to talk it down.

The dollar, which had tumbled Wednesday, rebounded after the European Central Bank sought to downplay the idea that it was on a sustained drive to raise interest rates.

The ECB, which for weeks has been talking up the dangers of rising inflation pressures, lifted its benchmark short-term rate from 4% to 4.25%, as expected. Although it was the rate’s first increase in a year, there might not be another one in the near future, the central bank’s president, Jean-Claude Trichet, hinted, saying, “I have no bias and we are never pre-committed.”

Had Trichet waved the flag for more rate increases, the dollar -- which had renewed its slide in recent weeks -- probably would have taken another sharp hit, said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

“Trichet could not have been expected to pre-commit to another rate hike lest he spark a further sell-off in the greenback that he would just as soon avoid,” Woolfolk said.

Still, Woolfolk expects the dollar to resume its downtrend “until the Fed signals its intention to begin raising rates again to fight inflation.”

The Federal Reserve can signal higher rates all it wants. But as long as the economy is bleeding jobs, and the financial system keeps showing new cracks, it’s going to be very difficult for the Fed to actually do the deed.

The Standard & Poor’s 500 index rose 1.38 points, or 0.1%, to 1,262.90. It fell 1.2% for the week and is down 19.3% from its record high, short of the 20% decline that traditionally marks a bear market.

The Nasdaq composite index fell 6.08 points, or 0.3%, to 2,245.38. For the week, it lost 3%.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange.

Yields on government bonds rose. The yield on the benchmark 10-year Treasury note climbed to 3.98% from 3.96% late Wednesday. An index of the dollar’s value against a basket of major securities jumped 1%.

Overseas, key stock indexes rose 1% in Britain, 0.8% in Germany and 1.1% in France. Japanese shares fell 0.2%.



Times wire services were used in compiling this report.