Market Awaits Fallout From July Jobs Strength

Hopes that yesterday may have been the bottom could be hurt by the stronger-than-expected employment report.
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Yesterday's hope that stocks had found their bottom may have just got washed away by a July

employment report

that came in much stronger than expected.

The nation added 310,000 nonfarm jobs last month -- well ahead of the 199,400 consensus estimate in the

Reuters

poll. Average hourly earnings added 0.5% -- well ahead of the 0.3% economists expected. The unemployment rate stayed at 4.3%, as expected.

Yet the effect of the report has been somewhat muted by continued rumors in the bond market that a trading desk, or desks, has gotten on the wrong side of widening spreads. This would put the credit market at risk, and has prompted a flight-to-quality bid in the Treasury market. Yesterday it helped the bonds rally despite bad economic reports, and today it may be damping the blow from the jobs report.

Not that that means stocks aren't going down.

"It was a surprise -- I think the market is going to discount a hike," said Jim Herrick, managing director of trading at

Robert W. Baird

. "You have this combined with

last week's

Employment Cost Index

, and it's almost a given that you're going to see some type of hike."

There is even some talk -- likely put out by shorts -- of the

Fed

stepping in today.

At 9 a.m. EDT, the

S&P 500

futures were off 9.2, nearly 8 below fair value and indicating a negative open. The 30-year Treasury was down a full point to 88 5/32, lifting the yield to 6.12%.

Tokyo stocks fell for a third day. Again, traders were laying the losses on the yen's strength -- although that seems a little like an excuse for a normal consolidation move. The

Nikkei

shed 273.95, or 1.6%, 17,084.24.

Yesterday's action in New York failed to cheer Hong Kong investors. The

Hang Seng

lost 87.28 to 13,167.06.

Europe came off a bit after the jobs report, but was still faring well.

The

Frankfurt

market was cheered by news that

Deutsche Telekom

(DT) - Get Report

agreed to buy U.K. cell-phone company

One2One

. The

Xetra Dax

was up 8.21 to 4986.66.

In Paris, the

CAC

was down 18.79 to 4221.91. Beyond the news from the U.S., the focus was on banks: Today shareholders must decide if they support

Banque Nationale de Paris'

hostile bid for

Paribas

and

Societe Generale

.

London's

FTSE

was up 8.5 to 6110.1.

Friday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

Earnings/revenue reports and previews

Unilever

(UN) - Get Report

posted an 8% increase in second-quarter profits.

Analyst actions

Goldman Sachs

upgraded

Yahoo!

(YHOO)

to its recommended list,

CNBC

said.

Mergers, acquisitions and joint ventures

Canada's

Le Groupe Forex

said it received a new takeover offer from

Boise Cascade

(BCC) - Get Report

, providing for three options to shareholders: $21.32 (C$32) cash to be paid by the retraction of a new class of Forex shares to be created; $21.32 (C$32) in installment notes payable over five years with interest; or $21.99 (C$33) payable by the issuance of a new class of Forex shares to be created, which will be exchangeable into Boise Cascade stock. Yesterday, Forex's board met to consider the Boise Cascade offer, and Forex's board determined that the Boise Cascade offer is superior to the $20.66 (C$31) offer made by

Louisiana-Pacific

(LPX) - Get Report

on Monday.

MediaOne Group

(UMG)

and

Cable & Wireless

(CWP)

said they've agreed to sell One2One, the U.K. mobile telecommunications operator, their 50/50 joint venture, to Deutsche Telekom for $13.6, billion, including debt.

Nokia

(NOK) - Get Report

said it was in discussions to sell its

Salcomp

unit, which in 1998 had net sales of $151 million.

Sweden's

Volvo

(VOLVY)

has acquired a majority stake in rival truck and bus maker

Scandia

and was offering to buy the rest of the company for $7.4 billion.

Miscellany

Boston Scientific

(BSX) - Get Report

said it is voluntarily recalling from commercial distribution and use its

Rotablator RotaLink Advancer

and

RotaLink Plus

rotational atherectomy systems.

Britain's tax authority is seeking to determine whether

IBM

(IBM) - Get Report

improperly avoided taxes in that country by having its British unit pay artificially high royalties to the parent company,

The Wall Street Journal

reported, citing people familiar with the matter.

Inland Revenue

, the U.K.'s version of the

Internal Revenue Service

, has been examining IBM's books for about two years, the

Journal

reported.

The Inside Wall Street column in

Business Week

, penned by Gene Marcial, quotes Dave Talbot, managing partner at

Health/Vest Advisors

, as saying, "We wouldn't be surprised to see

NeoPharm

(NEO) - Get Report

acquired for a minimum of 50 a share." Talbot says the most likely acquirers are

Bristol-Myers Squibb

(BMY) - Get Report

and

Pharmacia & Upjohn

(PNU)

. NeoPharm closed yesterday at 14 3/4.

The column also has a positive item on

Cornerstone Internet Solutions

(CNRS)

, a stock that has a fan in Barry Rubenstein, managing partner at

Wheatley Partners

.

Elsewhere,

BioTime

(BTIM)

is a stock that has drawn the affection of Al Kingsley, head of money-management firm

Greenway Partners

-- who has acquired a 7% stake in BioTime -- but it's also a stock that is a current favorite of shorts, too, the column says.