NEW YORK (CNNfn) - U.S. stocks dipped lower Friday, but ended higher on the week, after the latest job market data clouded forecasts for the economy's recovery.|
Still, investor conviction withered as the Nasdaq Stock Market recorded its lightest trading volume of the year.
Before markets opened, the government said employers shed 42,000 non-farm jobs in July, building on June's 93,000 decline. And the nation's unemployment rate held steady at its highest levels since 1998.
While economists expected weaker numbers, the data did little to convince Wall Street that rising layoffs and growing unemployment are over.
"Wall Street is so skeptical that we need more than one hint, one hunch or one guess that the economy has bottomed," said Charles Payne, head analyst at Wall Street Strategies.
Kathleen Camilli, chief economist at Tucker Anthony, expects the unemployment rate to rise to a four-year high of 5 percent from July's 4.5 percent. "It's way too premature to talk about a recovery," she said.
Investors appeared to agree. The Nasdaq composite index fell 21.05 points, or 1 percent, to 2,066.33. Its first loss in four sessions narrowed the Nasdaq's weekly gain to 1.8 percent.
The Dow Jones industrial average slid 38.40 to 10,512.78, rising 0.9 percent over the last five sessions. A broader index, the S&P 500, shed 6.40 to 1,214.35 but rose 0.7 percent on the week.
Friday's losses counter gains on Wednesday and Thursday, when optimism over a spending rebound on computers and semiconductors sent stocks higher.
More stocks fell than rose. On the New York Stock Exchange, declining stocks beat advancing ones 1,582 to 1,489 as 929 million shares changed hands. Nasdaq losers topped winners 1.973 to 1,637. Only 1.24 billion shares traded, below the previous 2001 low of 1.29 billion set on July 5.
In other markets, Treasury securities dipped. The dollar was little changed against the euro and yen.
Sifting the numbers
The nation's unemployment rate held steady at 4.5 percent in July while employers shed 42,000 non-farm jobs – numbers that were stronger than expected.
The flat unemployment rate came as a surprise during a month when companies including JDS Uniphase, Lucent Technologies and Hewlett-Packard announced job cuts.
But on Wall Street, where sinking profits and rising job cuts have troubled markets this year, the stronger-than-expected figures met skepticism about sustainability.
"Although these data were better than expected, job creation is still weak," said Steven Wood, economist at FinancialOxygen.com.
The numbers, Wood said, are still soft enough to prompt the Federal Reserve to cut interest rates Aug. 21 for the seventh time this year. But some economists said the figures may temper forecasts for more rate cuts after August.
A Reuters poll of 25 Wall Street firms found that they all expect a rate cut this month by the Fed to be its last of the year.
The government figures showed that the worst job losses were in the troubled manufacturing sector, where payrolls tumbled by 49,000.
But another Friday report revealed sluggishness outside manufacturing. The National Association of Purchasing Management's index on the service side of the economy fell to 48.9 in July from 52.1 in June; a reading under 50 signals contraction in the sector.
"The issue in my mind is what kind of recovery we get from here," Joe LaVorgna, senior economist at Deutsche Bank Alex. Brown, told CNNfn's Market Call.
A recovery in profits may take time. Earnings at America's largest companies are expected to fall this year for their first annual decline since 1991. A rebound isn't expected until 2002, when year-to-year comparisons get easier.
Stocks whose fortunes are considered tied to the economy fell. Home Depot (HD: down $0.65 to $49.13, Research, Estimates), American Express (AXP: down $0.97 to $40.45, Research, Estimates), and General Motors (GM: down $0.18 to $63.28, Research, Estimates) all declined.
Tyco International (TYC: up $0.51 to $53.29, Research, Estimates), one of the nation's most acquisitive companies, continued its shopping spree, buying Sensormatic Electronics (SRM: up $8.18 to $23.12, Research, Estimates) for $2.3 billion in stock.
Third-quarter net income for media company Walt Disney (DIS: up $0.10 to $26.60, Research, Estimates) beat expectations on revenue that fell to $5.97 billion from $6.03 billion a year earlier.
In other earnings, John Hancock Financial Services (JHF: up $0.70 to $39.80, Research, Estimates) said its second-quarter operating profit rose above expectations.
The biggest loser on the Nasdaq, Noven Pharmaceuticals (NOVN: down $14.34 to $18.98, Research, Estimates), which makes patches that administer drugs through the skin, said full-year results will fall short of forecasts.
Dial (DL: up $0.59 to $17.44, Research, Estimates), the household products maker, signaled that it may put the company – or parts of it – up for sale.
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