Stocks fall after grim jobs report
The stock market closed the week with another ugly loss Friday after the government reported the biggest drop in jobs in five years.
The Labor Department’s report of a 63,000-job reduction in payrolls last month added to a raft of other indicators suggesting that a recession was underway, and provided one more impetus for disheartened stock investors to head for the exits.
“We’re in a bear market and we don’t have the conditions yet to end it,” said Phil Roth, a technical market analyst at New York brokerage house Miller Tabak & Co.
In a bearish sign, the Dow Jones industrial average dropped under its low of 11,971.19 set Jan. 22. Some other stock indexes already are down more than 20% from their highs, the threshold that generally marks a bear market.
For the day, the Dow slid 146.70 points, or 1.2%, to 11,893.69. The index was down 220 points before trimming its losses at the end of the day. The blue-chip indicator is off 3% for the week and down 16% from its early October high.
The Standard & Poor’s 500 index slipped 10.97 points, or 0.8%, to 1,293.37. It skidded 2.8% for the week and is down 17.4% from its October record high.
The Nasdaq composite index eased 8.01 points, or 0.4%, to 2,212.49. Nasdaq is off 2.6% for the week and has slumped 22.6% from its Oct. 31 peak.
Stocks rallied early in the day on hopes that the job number would prompt the Federal Reserve to cut interest rates significantly on or before its next meeting March 18. Expectations are rising that the central bank could slash rates by three-quarters of a point.
Investors also took solace from the Fed infusing additional cash into the beleaguered banking system in hopes of loosening the credit crunch.
But pessimism soon took over as the dispiriting jobless data seemed to confirm that the economy was gripped by recession.
The S&P; 500 fell below its January low on Thursday. However, the S&P; remained above its Jan. 23 intraday low of 1,270, and analysts said investors were nibbling at stocks in hopes that the intraday low would ultimately prove to be the bottom for the market.
Mortgage investor Thornburg Mortgage said it didn’t have enough cash to pay off margin calls imposed by its lenders and that there was “substantial doubt” it could remain in business. Its shares, which plunged 51% on Thursday, rose 14 cents to $1.79.
Shares of Washington Mutual sank to their lowest point in a dozen years after a Merrill Lynch analyst forecast that the thrift company might lose more than $11 billion through next year because of mortgage losses. The stock fell $1.05 to $10.71.
Some analysts were encouraged that the stock market did not sink more dramatically.
“I would have thought that we would be down big-time,” said John Bollinger, head of Bollinger Capital Management Inc. in Manhattan Beach.
Alexander Paris, president of Chicago money-management firm Barrington Research Associates Inc., thinks investors could head back in quickly if the stream of bad economic news eases.
“There’s a lot of money on the sidelines and a lot of people afraid of missing a rally,” he said.
After plummeting in recent days, financial stocks rallied and helped to limit the market’s overall losses. Technology and real estate stocks also showed gains.
On the downside, materials and energy issues were off sharply on expectations that demand would drop as the economy slackens.
European markets also shuddered with the worse-than-expected news from across the Atlantic. A major sell-off brought shares to their lowest close in six weeks, with the FTSE Eurofirst 300, an index of leading European stocks, closing 1.1% lower.
Stocks had dropped even more steeply at mid-afternoon with reports of the U.S. jobless rate and further shock waves from the U.S. sub-prime meltdown, which prompted a stumble in banking and financial shares.
A slight uptick at the end of the day mitigated the damage, but France’s CAC 40 closed down 1.3%, while the Dax in Frankfurt fell 1.2%.
“It’s mainly two areas of concern: the ongoing credit crunch, and secondly, concerns over the economic outlook in the U.S.,” said Robert Parkes, equity strategist at British bank HSBC.
With the overall volatility in the last year’s market, Friday’s drop was “about the normal environment,” he said. “It wasn’t what I’d say is a big move.”
The euro hit a fresh high of $1.546, before easing to close at $1.534. Gold fell $2.80 to $972.20 an ounce.
Treasury yields were mixed. The yield on the 10-year Treasury note fell to 3.53% from 3.58% on Thursday, but the yield on the two-year note rose to 1.52% from 1.51%.
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kim.murphy@latimes.com
