Investors have had an allergic reaction to this morning's
employment report, which showed stronger-than-expected job growth. In recent action, the major averages had done little to retrench from session lows -- both the
Dow Jones Industrial Average and the
Nasdaq Composite Index were solidly in the red.
The jobs report, considered the best single snapshot of the health of the economy, suggested that the economy might be healthier than Wall Street experts had previously thought. The data showed that nonfarm payrolls grew by 268,000 in January, compared with economists' forecast of 83,000 new jobs. Still, the report revealed that the unemployment level rose to 4.2% from 4%, which indicates a softening in labor conditions.
In afternoon trading, investors reacted negatively to the mixed report. Stocks that tend to benefit from an interest-rate cut, such as financial, retail, and cyclical issues, were down. The
Philadelphia Stock Exchange/KBW Bank Index
was lately down 0.3%, while the
S&P Retail Index
was recently off 2.3%, with losses in components
Morgan Stanley Cyclical Index
was behind 0.6%.
Technology stocks, which posted impressive gains during the month of January, were down for the second day in a row. Shares of
, the most actively traded stock on the
New York Stock Exchange
, were lately down 3.8% to $47.95.
Shares of large-cap Nasdaq issues were also suffering from an uncertain economic outlook:
dropped 5.9% to $36.12, while
fell 4% to $36.38. Cisco and Intel were the most actively traded issues on the Nasdaq.
Over on the Dow, stocks that advanced yesterday, as investors gained hope about the economy's future, retreated today.
was lately down 2% to $111.75, while
Minnesota Mining & Manufacturing
was recently off 3% to 108.34. These two were taking the most points away from the Dow in recent trading.
Companies that reported
bad earnings news or profit warnings last night, were feeling the pain today. Shares of
were off 7.6% to $25.18. The chipmaker said that third-quarter revenues will be 20% below the previous quarter. It had earlier forecast that revenues would drop 10%. At last look, the
Philadelphia Stock Exchange Semiconductor Index
was down 3.5%.
Other earnings newsmakers (but heartbreakers) from last night were also trading lower:
American Power Conversion
decreased 7% to $13.44.
Silicon Storage Technologies
fell 8.6% to $13.28. And
Copper Mountain Networks
dropped 24% to $5.94.
Major technology indices continued to have a rough time finding their way this afternoon. The
Amex Networking Index
was getting taken apart, losing 4.3%, while the
Nasdaq Telecommunications Index
dropped 3.5%. The
Philadelphia Stock Exchange Computer Box Maker Index
, which tracks computer companies, lost 1.2%.
Drug stocks saw some modest gains in late-day trading. The
American Stock Exchange Pharmaceutical Index
increased 0.4%. Shares of
were lately up 1.1%, while
was ahead 1.4%.
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Treasury prices are lower after having moved up for three consecutive days. The money market pulled back in the early session as hopes of yet another intermeeting interest rate cut decreased.
Employment data released this morning deflated some of that expectation, since the number of new nonfarm jobs created rose more than expected. At the same time, unemployment also rose more than expected. The jobless rate is now at its highest level in more than a year.
Yields are about 6 basis points higher for the notes, while those for the longer-dated securities are up marginally.
The benchmark 10-year
Treasury note lately was down 14/32 to 104 17/32, raising its yield to 5.144%.
In economic news, the
) showed that the number of new jobs, excluding those in farm-related industries, increased dramatically in January, to 268,000 -- much higher than expected. Economists polled by
had forecast only 83,000 new jobs. Still, the current number could well be revised significantly, as data for the first month of the year fluctuates considerably. (Indeed, the December numbers were noticeably revised, with new jobs for that month now estimated at 19,000, far lower than the 105,000 initially reported.)
Average hourly wages remained unchanged after having increased by 0.4% at the end of the year. They had been expected to grow by another 0.3%.
The unemployment rate rose to 4.2% in January, from 4% in December. This is the highest jobless rate since July 1999. Economists had been expecting 4.1%. The augmented unemployment rate, which includes those who are willing to work but are not actively looking for a job, rose to 7.1%, the highest level since March. The pool of available workers rose to 10.37 million in January from 10.19 million in December.
Future Inflation Gauge
chart ) slipped to 112.4 in January, its ninth consecutive decrease. This indicates minimal inflation fears.
) in December were up more than expected, growing at a rate of 1.1% rather than the anticipated 0.6%. However, excluding the key transportation sector that comprises the aircraft industry, monthly orders actually dropped 0.8%. The drop reflects slowing new auto sales and weak year-end retail sales. Over the past 12 months, the average overall number has plunged. It stands at 0.5%, sharply lower than the 12-month high of 16.3% in June.
Consumer Sentiment Index
chart ) is at its lowest level in more than four years, at 94.7. However, it was revised slightly upward through the second half of January from a preliminary reading of 93.6.
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