A seemingly friendlier-than-expected jobs report this morning, and Dr. Greenspan's surprise interest-rate cut earlier this week couldn't immunize this market against the earnings worries bug.

Today the market was hammered on concerns over the country's biggest bank,

Bank of America

(BAC) - Get Bank of America Corp Report

, analysts lowering estimates on several Dow components and a closer look at the unemployment report. Volume was heavy today, though the

New York Stock Exchange

didn't beat the record-breaking 2 billion shares it traded yesterday.

Though Bank of America tried to quash rumors that it will be hurt by a line of credit drawn by California utilities and large losses from derivatives trading, investors still put some stock in the gossip, sending it down and the market tumbling.

The major indices continued to extend their losses as the afternoon wore on, with the

Dow posting a drop of 250 points and the

Nasdaq down 159.

Trading in Bank of America shares was temporarily halted just after the opening bell, pending what was predicted to be bad news from the bank. In its announcement just after 10 a.m. EST, though, the bank said it does not see any significant derivative losses, that it remains comfortable with its 2001 credit quality guidance and that it has seen no other significant trading losses.

Last month, the Bank of America announced that it would miss fourth-quarter estimates, in part because of loan losses. In November, it had said that loan losses would double in the quarter due to problems with a large corporate loan that analysts attributed to troubled consumer-products maker

Sunbeam

(SOC)

. So, the new rumors about the bank getting hurt by the bankruptcy-headed California utilities bode nothing but ill for the institution, which fell 7.3%.

Firing the selloff in financials was the fear that the

Fed's surprise interest-rate cuts on Wednesday had been engineered to bail out an ailing financial sector. Concerns over weakening credit quality and trading losses have put pressure on many of the financial giants lately. Investors are particularly worried about the aforementioned utility company debt, given California's continuing power woes.

Financials got punished, with blue-chips

J.P. Morgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

down 5.9% and

Citigroup

(C) - Get Citigroup Inc. Report

off 3.6%. The

American Stock Exchange Securities Broker/Dealer Index

was off 3.6% as well, and the

Philadelphia Stock Exchange/KBW Bank Index

was 3.5% lower.

Blue-chip casualties on the earnings front included

3M

(MMM) - Get 3M Company Report

, which saw its estimates lowered by

Lehman Brothers

. 3M was the worst-performing component on the Dow, taking more than 29 points off the blue-chip Dow.

Alcoa's

(AA) - Get Alcoa Corp. Report

estimates were also cut, but weren't feeling it nearly as badly.

Other blue-chips on the cutting board were discount retailing giant

Wal-Mart

(WMT) - Get Walmart Inc. Report

, which was trimmed by

Robertson Stephens

and PC maker

Hewlett-Packard

(HWP)

, which got double-whammied by

UBS Warburg

and

Goldman Sachs

.

Goldman also lowered its estimates for

IBM

(IBM) - Get International Business Machines (IBM) Report

. 3M was off 3.7%, Alcoa fell 1.9%, Wal-Mart was down 4% and H-P was off 11.6%.

Other big-cap tech names such as

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

,

JDS Uniphase

(JDSU)

and

Oracle

(ORCL) - Get Oracle Corporation Report

were getting killed. Cisco was down 12.5% to $36.63, JDS Uniphase was off 12% to $42.13, and Oracle slid 7.5% to $30.13.

But

TheStreet Recommends

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

and

IBM

(IBM) - Get International Business Machines (IBM) Report

were higher, though just barely.

Another company sick with the earnings flu was Internet consulting firm

Sapient

(SAPE)

, which warned that its unaudited fourth-quarter earnings were 16% short of estimates. Sapient was off 0.4% to $15.

And

Next Level Communications

(NXTV)

, a communications-equipment maker, came out last night and cut its 2001 growth outlook. It was off 0.6% to $10.75.

W.R. Hambrecht

followed up the bad news by serving up downgrades for both.

Today's

employment report seemed friendlier than some were predicting. But a closer look at the underlying numbers told a different story, one which

TheStreet.com

covered

separately. Unemployment remained even with the previous month at 4%, despite forecasts it would rise to 4.1%. New nonfarm payrolls rose to 105,000, just above forecasts of 102,000. But growth in average hourly earnings came out just above forecasts at 0.4%, indicating that wage inflation continues to grow. Economists were expecting 0.3%.

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Sector Watch

Investors were defensive, flocking to safety in the form of drugs and tobacco. Both sectors have been suffering the past couple days as money flowed in to riskier technology stocks, but today they were leading the parade. The

American Stock Exchange Pharmaceutical Index

ended off 0.1%, while the

American Stock Exchange Tobacco Index

was rising by less than it had, up by 0.8%.

Energy stocks were back in favor with the

American Stock Exchange Natural Gas Index

up 2.6%, the

Chicago Board Options Exchange Oil Index

up 1.6%. The

Dow Jones Utility Average's

gains were taken away by fears over California's energy woes, though, and it ended down marginally.

Internet, biotech, semiconductor and PC stocks all tanked.

TheStreet.com Internet Sector

index was down 8.9%. The

Nasdaq Biotechnology Index

was tumbling 8.4%, the

Philadelphia Stock Exchange Semiconductor Index

was down 5.6%, while the

Philadelphia Stock Exchange Computer Box Maker Index

was dropping 4.6%.

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Bonds/Economy

Treasury notes were selling higher as traders believe the

Federal Reserve will trim interest rates again by the end of the month. The long bond, after falling earlier in the session, had checked its slide. It should finish higher today if its daily drift over the past week holds true. Treasury yields are near their two-year lows.

The unemployment data released today was not as bad as feared, but it didn't change the market's mood -- because the longer-term trend of many less new jobs being created is more significant. And some analysts are guessing that the currently available payroll and unemployment information will be revised and next month's report will be a lot worse. The morning didn't go by without a flutter though. Rumors about the financial services sector being exposed to defaulting California utilities supplied the tension. The equity market fell sharply and shorter Treasuries shot upward, despite the Bank of America denying the rumor.

The benchmark 10-year

Treasury note lately was up 24/32 to 106 3/32, lowering its yield to 4.945%.

In economic news, the

employment report

(

definition |

chart |

source

) had nonfarm payrolls, which are new jobs created during the month, rising by 105,000 in December. But the government accounted for more than half of this growth, while privately held manufacturers continued to lose jobs. The unemployment rate remains at 4%, slightly better than expected. Economists polled by

Reuters

had forecast it at 4.1%.

The augmented unemployment rate rose 7% in December as compared to 6.9% the previous month. It differs from the regular unemployment number by also counting those unemployed people who are not actively looking for a job but would begin working again if offered one.

The average hourly earnings increased 0.4%, little more than expected, as the annual rate edged up to 4.2% from 4.1%.

New home sales

(

definition |

chart |

source

) fell 2.2% to 909,000 in November, a little more than predicted, from 929,000 in October. Due to the low mortgage rates, economists had expected the number at 913,000. It has now declined for the third consecutive month, but remains well above the level it had dipped to earlier last summer.

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