U.S. Stocks Decline After Jobs Report Heightens Rate Concern
By Deborah Stern
U.S. Stocks Decline After Jobs Report Heightens Rate Concern
New York, Aug. 6 (Bloomberg) -- U.S. stocks fell after a
government report showed an unexpected jump in new jobs and wages
in July, leaving intact concern the Federal Reserve will raise
interest rates. Financial companies including American Express
Co. and Citigroup Inc. led the decline.
''This further reinforces the view that we may be seeing
signs of pressure in the labor market, and the odds are better
for further rate increases,'' said John Bartlett, who helps
oversee about $9 billion at Commerce Bancshares Inc. in St.
Louis. A rate increase would slow the economy and profit growth,
he said.
Throughout the week, concern that interest rates are headed
higher roiled stocks, prompting early rallies followed by late
declines, and a one-day swing of 250 points in the Dow average
Thursday.
For the week, the Dow industrials rose 0.6 percent, the S&P
500 fell 2.1 percent and the Nasdaq Composite dropped 3.4
percent. The Nasdaq has lost 11 percent from its July 16 record,
more than the 10 percent Wall Street considers a ''correction.''
Some 696 million shares changed hands on the Big Board,
below the three-month daily average of 737 million.
Employment Report
The Labor Department said the economy added 310,000 jobs in
July, 50 percent more than the 206,000 analysts expected. Average
hourly earnings rose 0.5 percent, versus expectations of a 0.3
percent increase. Labor costs account for two-thirds of consumer
prices, so Fed policy-makers watch them in their deliberations on
inflation and interest rates.
''I haven't seen this kind of (investor) focus on inflation
for a decade,'' said Dreman. Under other circumstances, stocks
may have plunged on today's news, he said, but ''this data may
already have been built into the market over the past week or
so.''
Dreman said if government reports before the Fed meeting
Aug. 24 continue to show the economy is accelerating, ''there'll
be at least one rate hike between now and October.''
Higher interest rates usually cause stocks to drop because
they reduce the amount investors are willing to pay for their
share of companies' future earnings, especially in industries
such as computers where expectations are high.
For banks, they mean less demand for loans and lower prices
for the bonds they own.
''Higher interest rates always raise the big concern (for
banks), which is credit quality,'' said Nancy Bush, a bank
analyst at Ryan, Beck & Co.
Citigroup lost 1 1/2 to 42 1/2, American Express dropped 4
1/16 to 123 1/16 and J.P. Morgan & Co. fell 2 9/16 to 122 15/16.
General Electric Co., whose GE Capital unit is the world's
biggest non-bank finance company, lost 2 9/16 to 107. The
Bloomberg Wall Street Index fell 3.7 percent.
Online Brokers
Online brokerage stocks posted some of the biggest declines
on concern that higher interest rates and lower stock prices will
prompt investors to trade less. E*Trade Group Inc. fell 1 5/8 to
25 3/4 and Charles Schwab Corp. lost 1 9/16 to 40 3/16.
Other brokers also fell. Goldman Sachs Group Inc. declined 3
to 56 1/4 and Merrill Lynch & Co. dropped 2 1/2 to 63 7/8.
American Home Products Corp. tumbled 6 1/16, or 12 percent,
to 44 7/8, leading the S&P 500 lower. A Texas jury ruled that the
fifth-largest U.S. drugmaker should pay $23.3 million to a woman
who said she suffered heart-valve damage after taking the now-
discontinued fen-phen diet drug combination.
Boston Scientific Corp. fell 6 1/2, or 18 percent, to 30
after the company, one of the biggest makers of angioplasty
products, said it's reducing its 1999 earnings expectations by
about 8 cents a share because of a product recall.
The company is voluntarily recalling its Rotablator RotaLink
Advancer and RotaLink Plus rotational systems for atherectomy,
the removal of fatty deposits from artery walls.
MindSpring Enterprises Inc. gained 2 13/16 to 28 13/16. The
No. 5 U.S. Internet service said it will distribute a co-branded
version of AOL's Instant Messenger message service to its
customers. AOL also signed a similar agreement with EarthLink
Network Inc., the No. 4 service, which rose 4 1/2 to 41 9/16. AOL
gained 13/16 to 84 3/4, its first rise in seven sessions.
================
EBay's Internet Auction Site Crashes Again After Maintenance; Shares Fall
By Alice Wang
EBay's Auction Site Crashes Again, and Shares Fall (Update6)
(Adds that site was mostly restored shortly after 5 p.m.)
San Jose, California, Aug. 6 (Bloomberg) -- EBay Inc., the
No. 1 online auctioneer, had a system failure that lasted more
than nine hours, pushing its shares down 10 percent.
The company said its auction site crashed around 7:30 a.m.
New York time because of ''network anomalies'' after being off
line for several hours for weekly maintenance. Most functions of
the site were restored shortly after 5 p.m., though the search
function still wasn't operating normally.
The crash follows a number of such failures in recent
months, including four outages in July and a 21-hour outage on
June 10. The company said the June 10 outage could cut as much as
$5 million from its second-quarter revenue.
EBay's problems could create inroads for competitors. While
eBay isn't the only auction site to have outages, its shutdowns
may prompt customers to test rival auction sites run by Yahoo!
Inc. and Amazon.com Inc., some eBay investors have said.
''What eBay is doing when these outages happen is they're
providing free publicity to these other sites, who capitalize on
their problems,'' said Sue Rothberg, senior analyst at Gomez
Advisors Inc., a research company based in Concord,
Massachusetts. ''I think people are losing patience. It's getting
to be a broken record.''
EBay shares fell 9 5/8 to 83 1/4.
Working on Backup
Earlier this week, Vice President Steve Westly said eBay was
working on a new backup computer systems that would limit future
outages to less than 20 minutes. He said the new systems would be
in place by year's end.
''It's not clear what the problem is. That's going to create
a tremendous amount of customer dissatisfaction,'' said Richard
Whitehead, vice president of strategic technologies at Micromuse
Inc., a management software company in San Francisco.
With an outage of this nature, ''the only way to retain
customers is compensation'' for the lost auction opportunities,
he said.
EBay said it will extend all auctions that were due to end
between the time of the outage and the time at which service was
restored. The company also will refund all listing fees for those
auctions. Spokesman Kevin Pursglove declined to say how much
revenue eBay will lose because of the outage. |
