Stocks Drop as ADP Report Dents Confidence

Stocks struggled Wednesday after ADP's March employment report showed the private sector lost 23,000 jobs. Gregg Greenberg has The Real Story.

By David Moss , Mar 31, 2010 5:18 PM EDT

NEW YORK (

TheStreet

) -- Stocks slumped Wednesday after a weaker-than-expected assessment of the private-sector labor market sparked fears about what's ahead in Friday's government jobs report.

The

Dow Jones Industrial Average

fell 51 points, or 0.5%, to 10,857. The

S&P 500

lost 4 points, or 0.3%, to 1169, while the

Nasdaq

slid 13 points, or 0.5%, at 2398.

Automatic Data Processing

said the private sector shed 23,000 jobs in March, dashing economists' expectations for job growth of 40,000. February's job losses were downwardly revised to losses of 24,000 from previously reported losses of 20,000.

"The ADP report is not changing my projections at all," said Peter Cardillo, chief market economist at Avalon Partners of his expectations for Friday's jobs report from the government. He expects job growth of 135,000, with the unemployment rate to decline to 9.5%. "Most of the hiring showing up in the report will come from the government," he added, referencing census-related hiring, which market- watchers expect will boost job creation in March.

On average, economists anticipate an additional 190,000 jobs when the Labor Department releases its March nonfarm payrolls report and expect the unemployment rate to hold at 9.7%. But the stock market will be shuttered for Good Friday when the report is released, suggesting traders are positioning themselves ahead of the release.

"We're going to get quieter as we get closer to the jobs report," said Chip Hanlon, president of Delta Global Advisors. "It's just weird we're having such a big data point coming in on a day when the market is closed."

Overseas, Hong Kong's Hang Seng fell 0.6%, and Japan's Nikkei slipped 0.06%. The FTSE in London gained 0.1%, and the DAX in Frankfurt added 0.2%.

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The Economy

President Obama relaxed a ban on

offshore drilling, opening up areas off of Virginia's coast.

The March employment report from Automatic Data Processing rattled investors, showing additional job losses of 23,000 and disappointing consensus estimates for job growth of 40,000. The ADP release is considered an early read on the government's jobs report due Friday.

The

Chicago Purchasing Managers' Index for March came in at 58.8, missing consensus estimates for a reading of 61 and slipping from February's level of 62.6.

February factory orders rose 0.6%, according to the Census Bureau after rising 1.7% in January. Economists had been anticipating growth of 0.5%.

The Energy Information Administration said crude oil inventories rose by 2.9 million barrels in the week ended March 26, which surpassed the 2.65 million-barrel increase that analysts polled by Platts had been projecting. It also exceeded the 421,000-barrel build reported by the American Petroleum Institute late Tuesday.

Gasoline stocks were also higher-than-expected, rising by 300,000, dashing expectations for a drawdown of 2 million barrels. Distillates stocks came in as expected, losing 1.1 million barrels. Analysts had been looking for a decline of 1.2 million barrels.

The day marks the end of the

Federal Reserve's

$1.25 trillion mortgage-buying program. The central bank is making good on its promise to begin unwinding accommodating policies as the recovery matures.

It also marks the end of the first quarter. During the period, the Dow had its best beginning quarter since 1999, adding 4.1% on the back of climbing bank and industrial stocks, among others. The blue-chip average declined 13% at the same time last year.

"We got a positive first quarter, a big run off the lows," Hanlon added. "The big question is if the market is predicting a lasting recovery or if the stock market is betting on a reflation trade. I'm betting on the latter."

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Company News

After the closing bell,

Research In Motion

(RIMM)

said a record 4.9 million new BlackBerry subscriber accounts were added in the fourth quarter, helping power both top and bottom-line growth. Still, RIM came up short of forecasts on both counts, sending shares down over 5% in extended trading.

Micron

(MU) - Get Report

shares, on the other hand, were moving higher in after-hours trading following late news that the chipmaker posted a second-quarter profit following a loss at the same time last year.

Boeing

(BA) - Get Report

was one of the Dow's biggest laggards, along with

Cisco Systems

(CSCO) - Get Report

Microsoft

(MSFT) - Get Report

and

DuPont

(DD) - Get Report

. Boeing's stock fell 92 cents, or 1.3%, to $72.61 after it announced that it will take an income tax charge of $150 million related to the new health care reform law. Boeing said the charge is expected to lower first-quarter 2010 net earnings by 20 cents a share.

Energy was the day's strongest sector with

Chevron

(CVX) - Get Report

topping the Dow followed by

Bank of America

(BAC) - Get Report

Johnson & Johnson

(JNJ) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

Citigroup

Ford

(F) - Get Report

and Bank of America continued to see the heaviest trading on the

New York Stock Exchange

, which had a listed volume of 4.5 billion shares. The Dow, meanwhile, saw volume of 194.4 million, compared with an average volume of 200 million.

Shares of

Honeywell

(HON) - Get Report

traded 0.7% higher at $45.27 after the company raised its first-quarter outlook late Tuesday.

Rite Aid's

(RAD) - Get Report

stock lost 11.2% after the drug store narrowed its fourth-quarter loss but missed analysts' estimates.

Securities and Exchange Commission

filing shows Carl Icahn has reduced his ownership in

Blockbuster

(BBI) - Get Report

to 5.1% as of March 29, down from a 16.9% stake of Class A shares in January.

Dollar General

(DG) - Get Report

shares traded 2.1% lower after it issued earnings for the year ending January 2011 that surpassed Wall Street's expectations.

Isis Pharmaceuticals

(ISIS)

and

GlaxoSmithKline

(GSK) - Get Report

will collaborate on the development of therapeutics for rare and serious diseases using an Isis drug platform, the companies announced. Shares of Isis surged 6%, to $10.92.

Australian coal company

Macarthur Coal

rejected a proposed acquisition from

Peabody Energy

(BTU) - Get Report

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Commodities and the Dollar

Crude oil for May delivery pared its gains following the government's inventory report, but held on in the afternoon, settling $1.39 higher to $83.76 a barrel.

Elsewhere in commodity markets, the June

gold contract added $8.80 to settle at $1,114.50 an ounce.

The

dollar was trading lower against a basket of currencies, with the dollar index down 0.5%.

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