Stocks Fall After Weak Jobs Reading

Stocks Fall After Slower-Than-Expected Jobs Growth, Rising Unemployment

Stocks lost ground Friday after the government’s much-anticipated employment report showed weaker-than-expected job growth and a rise in the unemployment rate. The major indexes each fell more than 1 percent, including the Dow Jones industrial average, which lost more than 150 points.

The Labor Department’s report that the nation’s unemployment rate rose to its highest level since November 2005 and that employers raised payrolls by only 18,000 unnerved investors worried that a weakening job market will hurt consumer spending.

A better-than-expected economic reading on the nation’s service sector briefly pulled stocks off their lows but wasn’t enough to shake investors’ concerns.

Investors had been awaiting the jobs report for weeks as they tried to determine whether the economy would continue to benefit from robust consumer spending even as sectors like home construction, mortgage writing and manufacturing slow. Wall Street is concerned that areas of weakness could puncture growth and even tip the economy into recession if consumers can’t depend on a solid job market.

Manufacturers, construction companies and financial services companies all cut jobs during the month amid an anemic housing market. Retailers also cut jobs.

The December report showed employers added the fewest jobs to their payrolls since August 2003. Economists had predicted a jobs growth figure of about 70,000 and an unemployment rate of 4.8 percent. Instead, unemployment climbed to 5 percent in December from 4.7 percent in November. While 5 percent unemployment is still considered good, the increase from November clearly made some investors nervous.

“It’s a scary number, no question about it. No matter how good you wanted to feel about the economy averting a recession there is far less conviction than even two or three days ago,” said Joe Balestrino, senior portfolio manager at Federated Investors.

In midmorning trading, the Dow fell 163.47, or 1.25 percent, to 12,893.25.

Broader stock indicators also fell. The Standard & Poor’s 500 index declined 19.47, or 1.35 percent, to 1,427.69. The technology-heavy Nasdaq composite index fell 49.83, or 1.91 percent, to 2,552.85, in part after an analyst downgrade of Intel Corp.

Small-capitalization companies also fell. The Russell 2000 index of smaller companies fell 14.14, or 1.90 percent, to 730.87.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 275.5 million shares.

Bond prices rose as investors sought the safety of government-backed debt after the report. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.84 percent from 3.89 percent late Thursday. The dollar was mixed against other major currencies. Gold prices, which have risen to nearly 30-year highs in recent days, declined.

Light, sweet crude fell $1.52 to $97.66 on the New York Mercantile Exchange. Oil touched $100 per barrel this week for the first time, stirring concerns about inflation.

The Institute for Supply Management, a business group, said its December index of non-manufacturing activity showed the nation’s service sector grew in December but at a slightly slower pace than in November. The index fell to 53.9 in December from 54.1 the prior month but analysts had expected a further decline.

In corporate news, a JPMorgan analyst lowered his rating on Intel to “neutral” from “overweight,” citing a drop in chip orders from computer manufacturers during the fourth quarter and high inventories. Intel, one of the 30 stocks that comprise the Dow industrials, fell $1.20, or 4.9 percent, to $23.47.

Regions Financial Corp. fell $1.58, or 6.8 percent, to $21.70 after warning it will set aside $360 million to cover bad loans in the fourth quarter. The bank, with branches mostly in the South and Midwest, said a sharp decline in demand for real estate is hurting loans to builders and property developers.

Overseas, Japan’s Nikkei stock average fell sharply, finishing down 4.03 percent to its lowest level since July 2006 after being closed since the previous Friday for New Year’s holidays. The pullback followed uncertainty on Wall Street about the U.S. economy and rising oil prices.

Britain’s FTSE 100 fell 1.02 percent, Germany’s DAX index fell 1.08 percent, and France’s CAC-40 fell 1.24 percent.

AP