TheStreet.com

I Markets I
Stocks Edge Off Session Lows
By Mike Taylor
Staff Reporter
09/05/08 02:12 PM EDT

Updated from 1:09 p.m. EDT

Stocks in New York rose off their lows to trade choppily Friday as the government's read on unemployment jumped for August, renewing investor concerns about a U.S. recession.

The Dow Jones Industrial Average was down 16 points to 11,172, and the S&P 500 gave back 3.9 points to 1233. The Nasdaq was off 13 points at 2246.

Before trading got under way, the Labor Department reported that the August unemployment rate reached 6.1%, its highest level since September 2003. Economists had expected the rate to hold at July's level of 5.7%. Nonfarm payrolls were down by 84,000, a bigger loss than 75,000 in July. The average workweek remained unchanged at 33.6 hours, and the average hourly wage rose 0.4% from a month ago to $18.14.

"Terrible," said Jack Ablin, chief investment officer at Harris Private Bank, of the jobs number. "I would say that it really kind of knocks the legs out of any thought of recovery here." He said the unemployment number further complicates an already difficult situation brought about by the housing crisis and credit crunch.

Ablin said that the the economic stimulus package has helped the U.S. avoid the definition of a recession. "But ask most people [and] I think they would agree that we are experiencing recession even if the numbers don't show it," he said. "And [the jobs number] would confirm my suspicion."

Some of the weak data was already priced in to stocks, which is why the market didn't fall as much as it could have following the unemployment release, said Ablin.

The Mortgage Bankers Association also said foreclosures were on the rise in the second quarter. On a seasonally adjusted basis, the percentage of loans with missed payments climbed to 6.41%, from 6.35% in the first quarter.

In company news, bond fund manager Pimco, part of Allianz (AZ:Nasdaq) , named Mohamed El-Erian as chief executive. El-Erian replaces Bill Thompson, who retires at the end of the year.

Meanwhile, hedge fund Atticus Capital refuted rumors it is closing down. Earlier this week, fellow fund Ospraie Management shuttered its business after making bad bets on commodities.

Shares of Merrill Lynch (MER:NYSE) appeared to be headed for a rough day after Goldman Sachs slapped a "conviction sell" sticker on the stock, saying it foresees more asset writedowns in Merrill's future.

Elsewhere, General Electric (GE:Nasdaq) said it would sell its warranty-management business to insurance company Assurant (AIZ:Nasdaq) for $140 million.

Cigarette maker Altria (MO:NYSE) is in negotiations to purchase chew-tobacco producer UST (UST:NYSE) , according to a report on CNBC's Web site.

Contributing to bearishness in the sector, mobile-phone maker Nokia (NOK:NYSE) was also hurting after saying its market share would probably decline in the third quarter.

Separately, a Wall Street Journal report said that PC maker Dell (DELL:Nasdaq) is trying to sell its computer factories in a bid to remain competitive.

In one bright spot, SanDisk (SNDK:NYSE) jumped 26% after Samsung said it may be interested in buying the company.

As for earnings, video-game maker Take-Two (TTWO:Nasdaq) said Thursday after the close that it swung to a profit from a year ago and raised guidance. And ahead of the opening bell, chipmaker National Semiconductor (NSM:Nasdaq) reported a profit that rose year over year but its sales outlook disappointed, sending shares lower.

In commodities, the price of crude oil was down $1.86 at $106.03. Gold was losing 30 cents to $802.50.

Longer-dated U.S. Treasury securities were mixed. The 10-year was even in price to yield 3.62%, and the 30-year was up 6/32, yielding 4.25%. The dollar was gaining on the euro, yen and pound.

"I'm not worried about inflation, although the average hourly earnings did tick a little higher than expectations," said Ablin. He pointed out that commodities have recently underperformed stocks, and said, "I think we're shifting more toward a disinflationary, deflationary outlook." Such an environment would leave the Federal Reserve room to lower interest rates, said Ablin.

Major foreign exchanges, including the FTSE in London, the Dax in Frankfurt, the Nikkei in Japan and the Hang Seng in Hong Kong, were lower.

Try a 30-day FREE trial to RealMoney.com!