Updated from 4:05 p.m. EST
Concerns about another terrorist attack and a still-sluggish economy sent stocks lower Friday, pushing the major averages down for a fourth-straight week.
Dow Jones Industrial Average
ended down 65 points, or 0.8%, at 7864, while the
finished down 19 points, or 1.5%, at 1282. The
fell 8 points, or 1%, to 829. For the week, the Dow lost 2.3%, while the S&P fell 3% and the Nasdaq shed 2.8%.
"To call the investment community jittery and unsure at this time is nothing but a huge understatement," said David Skarica, editor of the newsletter Addicted To Profits. "Currently, it is the most dangerous time in the last five years to be invested in the market."
The Bush administration raised the national terror alert to orange from yellow Friday to indicate a high risk of a terrorist attack. The government said it has received indications that al Qaeda may be planning attacks on U.S. targets in mid-February and has ordered security to be tightened at major bridges and tunnels as well as ports, railroads and nuclear power plants.
Meanwhile, analysts and investors ignored January's employment report, which seemed to suggest that the labor market could be stabilizing.
"The reality is, the economy is still weak," said Donald Straszheim, president of Straszheim Global Advisors. "Twelve months into the recovery, jobs are down 0.1% versus a postwar average of +3.3%. The only weaker recovery was after the 1990-91 recession."
The unemployment rate fell to 5.7% in January from 6% in the prior month as the economy added 143,000 nonfarm jobs. That was the strongest job growth since November 2000 and easily exceeded consensus expectations, which called for 69,000 jobs to be added to the payroll. Analysts had expected the jobless rate to remain steady at 6%. In December, 156,000 jobs were lost.
"The bigger picture is that a net 13,000 jobs have been lost over the past two months," said David Rosenberg, chief economist at Merrill Lynch.
Rosenberg, like other economists, argued that the January data are misleading because of seasonal adjustments. He claims that because fewer retail workers were hired ahead of the holidays, fewer were let go in January. About two thirds of the job growth came from the retail sector, but excluding jobs in that area, the economy added just 42,000 jobs.
In addition, the government changed its methodology of calculating the household survey, which means that the January employment rate is not directly comparable with earlier data. Still, the report did seem to show that things aren't getting any worse.
"Overall, the report supports the view of a plodding, but still improving economy. It does not signal a sudden, dramatic turnaround," said Bill Cheney, chief economist at John Hancock Financial Services.
Separately, wholesale inventories rose 0.8% in December, above the 0.2% consensus estimate.
Concerns about the likelihood and timing of war with Iraq also added pressure Friday after President Bush said Thursday night that "the game is over" and Secretary of State Colin Powell said the crisis will reach a conclusion "within weeks." Crude oil hit a three-week high of $35 Friday.
"Until we get some resolution on the geopolitical issues, you're going to continue to see these false starts," said Joe DeMarco, head trader at HSBC Asset Management. Stocks opened higher Friday before quickly paring their gains.
In corporate news, biotech firm
surged 22% to $42.20 on a report that it is about to be acquired by
Johnson & Johnson
for $45 a share. According to
The Wall Street Journal
, J&J covets Scios's drug pipeline, including a well-regarded treatment for rheumatoid arthritis. J&J fell 0.5% to $51.84.
gained 10% to $43.02. The health insurer, whose shares got pummeled in October after it said it had underestimated medical costs, earned $47 million in the fourth quarter, down from $191 million a year ago. On an adjusted basis, however, the company made $1.27 a share -- 7 cents better than forecasts -- and predicted this year will be better than expected.
rose 9% to $4.57 after saying it expects to lose 1 to 4 cents a share in the first quarter, which is narrower than the consensus estimate of a loss of 7 cents.
rose 5% to $16.49 despite reporting an 11% drop in fourth-quarter earnings and warning of a lower-than-expected profit in the first quarter and full year. Friedman Billings Ramsey upgraded the stock on a valuation call.
In other earnings news, publisher
said it earned 39 cents a share before a gain, about a penny better than expected, while
earned 36 cents a share in the fourth quarter, 3 cents better than expectations on a 17% revenue increase.
Volume on the
reached 1.25 billion shares, with losers beating winners by 2 to 1. On the Nasdaq, 1.23 billion shares changed hands with decliners outpacing advancers by 2 to 1.
Treasuries were firmer, with the 10-year note adding 1/8 to yield 3.92%.