DOW 10588 unable to hold its ground. Has a nice 65-90 pt drop still to go today.
edit now 10578
new LOD by 2:15
U.S. stocks gain after Intel lifts Q4 sales forecast
Friday December 3, 12:04 pm ET
By Mark Cotton
NEW YORK (CBS.MW) - U.S. stocks traded higher but off their best levels Friday as a raised fourth quarter sales forecast from Intel failed to dispel concern about the strength of the U.S. economy after a weaker-than-expected November employment report.
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U.S. non-farm payrolls increased a disappointing 112,000 in November while the unemployment rate dipped to 5.4 percent, the Labor Department estimated.
Economists were looking for stronger growth of about 204,000 in November, according to a survey conducted by CBS MarketWatch. None of the 42 economists surveyed forecast a figure as low as 112,000.
The Dow Jones Industrial Average (^DJI - News) was last up 29 points, at 10,614, off an intraday high of 10,643.05.
Within the benchmark index, Intel (NasdaqNM:INTC - News) climbed more than 6 percent on its revised fourth quarter sales outlook.
IBM (NYSE:IBM - News) rose 1.8 percent on a report it is planning to sell its personal computer business.
Wal-Mart (NYSE:WMT - News) edged up 0.4 percent after brokerage Smith Barney said it preferred the world's largest retailer over Target. (NYSE:TGT - News) .
In other broker action, Alcoa (NYSE:AA - News) fell as much as 3 percent after UBS downgraded the aluminum maker and its Canadian rival Alcan (NYSE:AL - News) , citing cost pressures and valuation concerns.
The Nasdaq Composite Index (NasdaqSC:^IXIC - News) hit a new intraday high for the year before paring gains, and was last trading up 10 points, at 2,153.
The tech-rich index rose as high as 2,164, surpassing the previous intraday high of 2,153 hit on January 26 as Intel's upbeat sales outlook sparked a broad-based rally in technology led by the chip sector.
The Philadelphia Semiconductor Index (Philadelphia:^SOXX - News) jumped 2.6 percent in midday trading.
The S&P 500 Index (CBOE:^SPX - News) edged up 3.34 points, at 1,193.67.
Stocks came off their early highs because investors are beginning to realize the full implications of this morning's disappointing job numbers, according to Michael Metz, chief investment strategist, at Oppenheimer & Co.
"People are having second thoughts about what these job figures mean," said Metz. "They raise questions about how self-sustaining the economy is."
Metz pointed to Wednesday's personal income and spending data for October which showed that spending was outpacing wage rises.
"People are not saving anything and that's absolutely unsustainable and this figure indicates that unless we get more rapid job creation, the economy is just not going to maintain its momentum."
Other factors are also at play, according to Jim Awad, chairman of Awad Asset Management.
"It's the end of the year and managers are looking at the glass half full rather than half empty, hoping and wishing for a strong December and a finish to a good year because they get paid on asset value," said Awad.
Comment on the employment report, Awad said investors were disappointed that there were not as many jobs created as anticipated.
Nevertheless, "it was still growth and growth creates in corporate profits and that drives stock prices."
On whether the relative weakness in job creation would lead to the Federal Reserve to mark a pause in its policy of raising interest rates at a measured pace, Awad said "it creates the possibility of earnings growth with a tolerable increase in interest rates."
The Federal Reserve is due to meet on December 14 to discuss interest rates. The Fed's key Fed Funds rate currently stands at 2 percent.
In other data, the Institute of Supply Management said non-manufacturing sectors of the U.S. economy expanded in November at their broadest rate since July.
The ISM non-manufacturing index rose to 61.3 percent from 59.8 percent when economists had been expecting a pullback to 57.8 percent.
Bonds rally on job data
On the bond market, treasury prices soared on the job data. The benchmark 10-year note was 1 3/32 ahead, at 99 28/32. Its yield (CBOE:^TNX - News) , which moves in the opposite direction of price, fell to 4.26 percent.
However, the disappointing jobs reading didn't appear to shift market thinking about Federal Reserve interest-rate moves in mid-December.
"While we acknowledge the data take out a lot of the risk for a shift to a more-than-measured pace, we still expect the Fed to stay the course through the first quarter," said analysts at Action Economics.
On the currency markets, the dollar fell to a new low against the euro on the data, and lost ground more ground against the Japanese yen.
The greenback was most recently down 1 percent against the euro, at $1.3395. The U.S. currency was off 0.7 percent versus the yen, at 102.45.
Gold futures wiped out early weakness to trade higher as the decline in the dollar spurred interest in the precious metal.
Crude futures continued to move lower in midday trading after two straight sessions of steep declines, which has seen the price of oil tumble 14 percent.
The benchmark January contract was last down 60 cents at $42.65 in trading on the New York Mercantile Exchange.
Turning back to the broader market, there were 19 advancers for every 11 decliners on the New York Stock Exchange, while losers had a 15 to 13 edge over winners on the Nasdaq.
Volume was 668 million on the Big Board, and 1.2 billion on the Nasdaq.
Intel soars on Q4 sales forecast
In the second major focus for the market, shares of Intel (NasdaqNM:INTC - News) soared after the world's biggest chip maker lifted its sales forecast for the fourth quarter.
In a note to clients however, Merrill Lynch however said it doubted the chip maker would post its third straight year of double digit revenue growth, saying this had not happened since 1996.
The brokerage said the company still has more capacity than it can fill, which it described as "a problem that isn't going to go away in a single quarter."
In other news, IBM shares climbed on a New York Times report that it is in talks with Levono Group, China's largest maker of personal computers, to sell its personal computer business.
The paper said Big Blue expects to get between $1 billion and $2 billion for its PC operations.
Elsewhere in technology, Wachovia Securities downgraded application software makers Oracle (NasdaqNM:ORCL - News) and Germany's SAP (NYSE:SAP - News) to "market perform" from "outperform".
Oracle has outperformed over the past three months due to the increasing likelihood that the company will acquire rival PeopleSoft Inc. (NasdaqNM:PSFT - News) , while most near-term upside on SAP was already built in the stock price, even though the fundamentals of the company remain strong, the broker said.
Oracle shares were off 1.1 percent at $12.81, while U.S.-listed shares of SAP were off a penny, at $45.25.
In the retail sector, shares of Target (NYSE:TGT - News) fell 1.3 percent to $51.14 after Smith Barney downgraded the company to "hold", suggesting clients consider shifting their investments to Wal-Mart Stores, Inc. (NYSE:WMT - News) .
The downgrade was based on a lack of near-term catalysts, tough same-store sales comparisons, and a belief that the retailer's shares appear to be fully valued.
Wal-Mart shares got a modest boost on the note.
Nokia (NYSE:NOK - News) shares fell 1.6 percent to $16.45 after the Finnish company said two key executives are to leave its networks business.
The departures mark the second round of resignations in two weeks and turn the spotlight on Nokia's infrastructure unit, which recently lost its largest American client. |
