Stocks Buffeted by Job Woes
Thursday May 3, 12:51 pm Eastern Time
By Elizabeth Lazarowitz
<<NEW YORK (Reuters) - Stocks were battered on Thursday after an unexpected jump in jobless claims and record corporate layoffs reignited fears about slowing U.S. economy.
As signs of a weakening labor market emerged, investors were bracing themselves for Friday's key monthly U.S. jobs report, which is expected to show an uptick in unemployment.
``The big concern here is tomorrow's jobs number,'' said Jeff Kleintop, chief investment strategist at PNC Advisors, which oversees $70 billion in assets.
``If in fact we see tomorrow morning that we had a (drop) of jobs in the month of April, that's going to raise some questions about the consumer, and the consumer really is the linchpin in the economy here,'' Kleintop said.
The technology-laced Nasdaq Composite Index (.IXIC) fell 62.31 points, or 2.81 percent, to 2,158.29 after four straight sessions of gains on Wednesday, when it closed 35.5 percent above a two-year low hit on April 4.
The Dow Jones industrial average (.DJI) tumbled 118.08 points, or 1.09 percent, to 10,758.60, while the broader Standard & Poor's 500 Index (.SPX) sank 21.89 points, or 1.73 percent, to 1,245.54.
There was more bad news on the earnings front after consumer and business products maker Newell Rubbermaid Inc. (NYSE:NWL - news) reported a sharp drop in profits and said it would cut 6 percent of its work force to lower costs. Newell fell $1.66 to $25.68.
Microchip gear maker Novellus Systems Inc. (NasdaqNM:NVLS - news) saw its shares slump after its profits fell from the previous quarter, citing a rapid slowdown in semiconductor capital spending. The company also said it does not expect a rebound in bookings until the fourth quarter. Novellus fell $1.59 to $25.75.
Wall Street was spooked early in the day after the government reported weekly first-time jobless claims climbed to 421,000 in the week ended April 28, well ahead of Wall Street expectations and soaring to their highest level since the week of March 23, 1996.
Further signaling a weakening labor market, job cuts announced by U.S. companies hit a record high in April -- the highest since the survey began in 1993 -- according to the outplacement firm Challenger, Gray & Christmas.
The firm said 165,564 new job cuts were announced in April, four times higher than in the same month a year earlier, compared with 162,867 in March.
``Finding the eventual return on earnings in the future is going to be harder,'' said Pierre Ellis, senior economist, at Decision Economics, although he added the unemployment data could also help assure the Federal Reserve will cut interest rates aggressively.
The Fed next meets on May 15 to decide what it will do with interest rates. The central bank has already lowered rates by two percentage points this year in a bid to keep the economy from tumbling into recession.
The government will release its April employment report on Friday morning, and U.S. nonfarm payrolls are expected to show a gain of 5,000 following a drop of 86,000 in March, according to a Reuters survey of U.S. economists. Unemployment is expected to rise to 4.4 percent from 4.3 percent in March.
Adding to the gloom on Thursday was an indication that the weakness plaguing manufacturing is spreading to other sectors, as well. The National Association of Purchasing Management (NAPM) said its monthly non-manufacturing index, which measures the service sector of the economy, fell to 47.1 in April from 50.3 in March. A number below 50 denotes contraction.
The downturn came two days after NAPM's manufacturing report showed activity shrank for a ninth straight month.
Wall Street was also focused on news that the U.S. Justice Department had approved General Electric Co.'s (NYSE:GE - news) $42 billion purchase of Honeywell International Inc. (NYSE:HON - news) after the companies agreed to sell a military helicopter engine unit and let a new company service some of Honeywell's small, commercial jet engines.
GE was down 81 cents at $48.29 and Honeywell lost 75 cents to $48.30.
Some analysts said the market was consolidating after a solid run up, particularly in technology stocks.
``Since the start of the quarter, the market's having a pretty good run,'' said David Sowerby, market strategist for money management firm Loomis Sayles, which oversees more than $65 billion in assets. ``It's still my belief that its three steps forward and a half a step back,'' he added.
The S&P 500 is still up 7 percent so far in the second quarter, and the Nasdaq is up 17.5 percent...>> |
