U.S. stocks attempt to battle back
By Julie Rannazzisi
Friday June 7, 2:03 pm Eastern Time
NEW YORK (CBS.MW) -- The stock averages erased the lion's shares of the bruising losses incurred at the start of trading following ugly warnings from Intel and Biogen, an employment report showing lackluster job growth and a widening probe into Tyco.
Software issues spearheaded recovery efforts in the tech sector, with Oracle and Microsoft springing into the plus column. Internet stocks followed on the upside and chip and hardware stocks -- though still deep in the red -- erased a chunk of earlier declines.
In the broad market, financial, oil service, drug and chemical shares turned higher while biotech and gold stocks continued to waver.
At its nadir Friday, the S&P 500 fell to lows not seen since late September while the Nasdaq came within 8 percent of the low reached after the terrorist attacks. And the Dow dropped to its lowest point since mid-November at the height of the selling.
The Dow Jones Industrial Average (CBOT: ^DJI - news) traded down 81 points, or 0.8 percent, to 9,543. Taking it on the chin were shares of Intel, American Express, Citigroup, AT&T, IBM and Eastman Kodak. SBC Communications, Boeing, DuPont, General Electric and Exxon Mobil squeaked out gains.
The Nasdaq Composite (NasdaqSC: ^IXIC - news) slumped 30 points, or 1.9 percent, to 1,524 and the Nasdaq 100 Index (NasdaqSC: ^NDX - news) slid 23 points, or 2 percent, to 1,134.
The Standard & Poor's 500 Index (CBOE: ^SPX - news) relinquished 0.5 percent while the Russell 2000 Index (CBOE: ^RUT - news) of small-capitalization stocks edged up 0.1 percent.
Florida-based HL Camp said that over the past 20 years there have been only 10 instances in which S&P 500 futures have gapped down by 10 or more points on an employment Friday, which occurred this morning. On such days, the market has closed down 60 percent of the time, the firm said, noting that those days also have the tendency to be extremely volatile, with significant intraday upswing movements.
Volume came in at 1.17 billion on the NYSE and at 1.35 billion on the Nasdaq Stock Market. Market breadth was still negative but improved markedly from the start of trading: decliners surpassed advancers by 16 to 14 on the NYSE and by 20 to 13 on the Nasdaq.
On the fund flow front, Trim Tabs estimated that all equity funds had outflows of $6.8 billion in the week ending June 5 compared with outflows of $700 million in the prior week. And equity funds that invest primarily in U.S. stocks had outflows of $5.8 billion vs. outflows of $1.1 billion in the prior week. Finally, bond funds had inflows of $1.4 billion compared with inflows of $500 million the prior week.
Inside the jobs figures
Amid a widening distrust of companies' accounting practices and the quality of earnings, investors have pooh-poohed uplifting economic news throughout the week, including a better-than-expected reading in a key gauge of the manufacturing sector.
On Friday, the May jobs report revealed a smaller-than-expected 41,000 gain in nonfarm payrolls. Still, it was the first back-to-back gains in payrolls since early 2001.
The May jobs report showed continued improvements in the labor situation but it also clearly revealed that headway is being made a slow pace. In an impatient market, that just doesn't cut it.
Lost in the sea of gloom permeating Wall Street was a decline in the May unemployment rate to 5.8 percent from the previous month's 6 percent. Economists polled by CBS.MarketWatch.com had expected a 60,000 increase in payrolls and a 6.1 percent unemployment rate.
"It's hard to imagine the labor market improving by much [considering where] jobless claims [are]," said Stephen Slifer, chief U.S. economist at Lehman Brothers. He said the unemployment rate -- a lagging indicator -- will continue to trend higher.
While the market is struggling to gauge the sustainability of growth in the economy, Slifer feels that a double-dip recession is an extremely low-probability occurrence due to the boatload of fiscal and monetary stimulus still sloshing around.
"Hiring has resumed following the 2000 and 2001 recession, but the pace of job creation remains minimal. To date, the hiring pickup has been focused in the temporary work category, suggesting that companies remain cautious about committing to permanent new employees. And the rate of hiring is still shy of that required to keep pace with typical labor force growth," commented Maury Harris, chief U.S. economist at UBS Warburg.
Intel tumbles, stinging chips
Intel's (NasdaqNM: INTC - news) lowered second-quarter revenue target following a midquarter update after the close Thursday put more pressure on the chip sector, already ravaged by a cadre of analyst downgrades during the previous session.
Intel blamed the expected shortfall on sagging European demand and was pummeled 18.2 percent in recent dealings. CIBC World Markets and J.P. Morgan H&Q followed with downgrades of the stock. Rival Advanced Micro Devices (NYSE: AMD - news) lost a bruising 10.7 percent after Robertson Stephens lowered the stock to a "market outperform" from a "buy" due to Intel's weaker outlook.
Canada's Nortel Networks (NYSE: NT - news) jumped 10 percent after raising $1.3 billion through a sale of stock and convertible debt. The sale generated solid demand, raising $500 million more than Nortel had expected. Fellow fiber-optic stock JDS Uniphase jumped 7 percent and Ciena 1.2 percent.
Biogen's bad news stalls biotechs
Biogen (NasdaqNM: BGEN - news) sliced second-quarter and full-year earnings targets due to weak sales of its flagship drug, Avonex, sending shares on a downward spiral. The stock recently changed hands down 12.1 percent while group leader Amgen subtracted 4.1 percent.
ImClone Systems (NasdaqNM: IMCL - news) was a holdout in the biotech group, rallying over 13 percent after taking a pummeling on Thursday as the firm and its former CEO Samuel Waksal come under increased scrutiny from investigations by the Securities and Exchange Commission and Congress.
Tyco International (NYSE: TYC - news) crashed 22.3 percent and has fallen over 48 percent since the start of the month. A criminal probe into the company's former CEO broadened and the company said it began a search for a new chief executive. Tyco was downgraded by J.P. Morgan to a "market performer" rating from a "buy" on Friday.
Check Movers & Shakers for the latest individual stock news.
Treasurys in rapid descent
In a rare move, government bonds followed stocks lower after posting decent gains this week.
The 10-year Treasury note shed 18/32 to yield (CBOE: ^TNX - news) 5.055 percent while the 30-year government bond dropped 21/32 to yield (CBOE: ^TYX - news) 5.655 percent.
In the currency sector, the dollar added 0.3 percent to 124.49 yen while the euro declined 0.3 percent to 94.40 cents. |
