Stocks Ease Gains as Jobs Enthusiasm Wanes

The morning's wins fall off by midday, and the Nasdaq declines on dismal Sun Micro results. The Labor Department says 20,000 workers were shed in April, but the jobless rate improved.
By Sarina Penn ,

Updated from 9:39 a.m. EDT

Stocks were losing some steam Friday as enthusiasm wound down for an employment report that wasn't nearly as bad as economists were expecting.

The

Dow Jones Industrial Average

, up some 120 points earlier, recently shook off a chunk of those gains with a 34-point climb at 13,044. The

S&P 500

added 4 points to 1413. The

Nasdaq Composite

, sagging amid dismal results from

Sun Microsystems

( JAVA), shed all of its morning winnings and then some, falling 8 points to 2471.

Each of the indices had launched the session higher in reaction to the Labor Department's nonfarm payrolls data, which showed a decline of 20,000 workers in April, whereas a

Bloomberg

survey predicted the number would be more around 75,000. Earlier this week, the ADP's figures showed a better-than-expected climb of 10,000 jobs last month.

"Basically, what I really think this indicates is that the economy is flat-lining, and right now flat-lining is better than what the market perceptions were," said Michael Strauss, chief economist with Commonfund, who had put the job-loss figure at 25,000. "It suggests that we're not getting the recession that a lot of economists and market participants have been forecasting for the past six to nine months."

"Historically, when we've been in the heat of a recession, we lost 250,000 jobs a month," Strauss continued. "We've lost 250,000 for the quarter. That's a stagnant economy, not a down economy."

Owen Fitzpatrick, head of equity strategy with Deutsche Bank Private Wealth Management, noted that, because the focus has shifted from worries about the financial sector to unease regarding whether or not the slowdown is transforming into a recession, the data "does alleviate some of that concern."

Still, his firm continues to call for a mild recession in the second and third quarters. Also, because the slowdown is being led by consumers, he also doesn't expect the recovery to be quick, since Americans are dealing with a host of issues aside from the housing crisis.

"I don't think we're out of the woods yet," he said.

The unemployment rate unexpectedly improved slightly, falling to 5% from 5.1% the prior month. Meanwhile, revisions were minor for February and March, with only an additional 1,000 jobs lost.

But, in Strauss's opinion, the best news in the report was the fact that that hourly wages picked up only 0.1% sequentially, compared with a 0.3% rise in the prior month. He pointed out that, while commodities have brought on inflationary pressures, if labor costs don't hang on for the ride, overall inflation can be kept under control.

"It makes even more sense for the

Federal Reserve

to be doing what they're doing," said Strauss, referring to the central bank's months-long series of interest-rate cuts, which some observers feared would exacerbate inflation. "We've got an input-cost problem with 12% of the goods in the economy: commodities. Away from that, we don't."

Following the data, the distraught U.S. dollar resumed its recovery, though the gains were lately tapering off. The greenback was adding 0.2% against the euro at $1.5434, and firmed by 0.8% against the yen at 105.22.

Investors were also pulling their funds out of Treasury securities. The 10-year note lost 16/32 in price to yield 3.83%, and the 30-year bond slid 19/32 in price, yielding 4.54%.

Also lending support to stocks was word that the

Federal Reserve

would boost its term auction facility to $150 billion from $100 billion previously, a move that makes more funding available for financial institutions.

Moreover, the Commerce Department reported that March factory orders ramped up 1.4%, a full percentage point better than expected, and up from a revised 0.9% drop in the prior month. Nondurable goods -- such as food, clothing, and tobacco products -- had the strongest showing, bumping up 2.6% after three straight months of negative to flat growth.

On the corporate front,

Sun Microsystems

(JAVA)

plunged 19.7% after the server maker

swung to a $34 million loss

in the fiscal third quarter and issued soft sales guidance for the current one, blaming tough economic conditions.

Staying in the tech space,

The Wall Street Journal

reported that

Microsoft

(MSFT) - Get Report

, which for three months has been attempting to pressure

Yahoo!

(YHOO)

to accept its stock-and-cash takeout bid, may go hostile and appeal directly to Yahoo! shareholders as early as today, citing people familiar with the matter. The paper also said, however, that Microsoft could well change its tune before making its announcement.

Microsoft shares were off marginally higher as Yahoo! rose 3.9%.

Back in earnings, Dow component

Chevron

(CVX) - Get Report

joined its oil-and-gas brethren in reaping rich profits from the recent spike in crude futures, and first-quarter income climbed 10% at $5.17 billion. Shares were up nominally at $95.06.

Viacom

(VIA.B)

, which owns MTV and other media properties, said first-quarter revenue was up 15% to $3.12 billion, partly thanks to strong sales of the Rock Band music-video game. The company's adjusted profit of 44 cents a share topped analyst predictions. Still, after a higher start, shares were ticking down 0.5%.

Insurer

MetLife

(MET) - Get Report

climbed 1.1% after operating earnings topped the first-quarter consensus, even as shriveling investments dragged its overall profit down 37%.

Also, engineering-and-construction concern

KBR

(KBR) - Get Report

more than tripled its first-quarter earnings to $98 million, or 58 cents a share, handily beating the 34-cent analyst consensus from Thomson Financial. Revenue surged to a better-than-anticipated $2.52 billion. The stock advanced 7.8%.

Wynn Resorts

(WYNN) - Get Report

gained 1% on

mixed first-quarter results

. The casino-resort operator posted a 20% profit drop, falling a penny short of per-share analyst projections, but revenue was better than expected.

Elsewhere,

Automatic Data Processing

(ADP) - Get Report

came in ahead of estimates as income climbed 6% to $413.6 million, but its 2008 profit-growth outlook strayed to the lower end of analyst targets. Shares lost 4.6%.

Last time out, stocks soared, with the Dow leaping 190 points to 13,010 and the S&P 500 up 24 points to 1409. The Nasdaq climbed 68 points at 2481.

Among commodities, crude oil was up $1.45 to $113.97 a barrel, and gold futures climbed $5.70 to $856.60 an ounce.

Markets abroad were tracking higher. In Asia, Tokyo's Nikkei 225 climbed 2.1%, and the Hang Seng in Hong Kong tacked on 1.9%. As for Europe, the FTSE 100 in London surged 2.1%. Germany's Xetra Dax and the Paris Cac jumped 1.7% and 1.5%, respectively.

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