Dow ends below 12,000First time blue-chip measure finishes beneath milestone since Oct. 18; strong job, ISM numbers spark bets that Fed won't cut interest rates in the near term.NEW YORK (CNNMoney.com) -- Stocks slipped Friday, with the Dow ending below 12,000 for the first time in more than two weeks, as a pair of strong economic reports and a steep decline in the bond market sparked bets that the Federal Reserve won't cut interest rates anytime soon. The Dow Jones industrial average (down 32.50 to 11,986.04, Charts) lost about 0.3 percent. The broader S&P 500 (down 3.04 to 1,364.30, Charts) index lost about 0.2 percent, and the tech-fueled Nasdaq composite (down 3.23 to 2,330.79, Charts) edged lower.
Bonds fell, the dollar gained, and oil jumped more than $1. Investors digested a surprisingly upbeat October employment report and a bullish read on the services sector of the economy. But the bond market took the one-two punch of strong economic news as a sign that the Federal Reserve is no longer likely to cut interest rates as soon as early next year, as many on Wall Street had been betting. Stocks have been under pressure lately, with the Dow sliding for five sessions in a row in response to a spate of weaker economic reports. With no economic reports due Monday, stocks may struggle to find direction. Investors also will be holding their breath ahead of Tuesday's congressional elections. As of 5 p.m. ET, Nasdaq and S&P futures pointed to a lower opening for stocks Monday. Friday's market The employment report and the ISM services report marked the first group of mostly upbeat economic news in at least a week. "The equity markets really didn't know what to make of it," said Larry Peruzzi, a stock trader at The Boston Company Asset Management. Peruzzi said it probably means the Fed will keep interest rates steady, or perhaps raise them, which accounted for the weakness in stocks. The unemployment rate fell to 4.4 percent in the month, a five-year low, the Labor Department reported Friday morning. Economists thought it would hold steady at 4.6 percent. Additionally, the government said that employers added 92,000 jobs to their payrolls in the month, down from an upwardly revised 148,000 in September. Economists were looking for a gain of 125,000. But the upward revision to job growth earlier in the year left the total number of jobs added in 2006 at a higher-than-expected level, perhaps overshadowing the modest October gains. Average hourly earnings, the report's inflation component, rose 0.4 percent versus forecasts for a rise of 0.3 percent. Earnings rose 0.2 percent in September. Released shortly after the open, the Institute for Supply Management's services sector index rose to 57.1 in October from 52.9 in September, topping forecasts for a rise to 54.5. While the report is less of a market mover than the employment report, it added credence to the feeling among investors that the economy is not as weak as had been thought. Stock movers Stocks of companies that are sensitive to rate hikes fell, including financials and homebuilders. The Amex Securities Broker/Dealer (Charts) index fell nearly 1 percent. The Dow Jones Home Construction (Charts) index lost 1.4 percent. Among other movers, Whole Foods Market (down $13.86 to $46.26, Charts) sank 23 percent in active Nasdaq trade after warning late Thursday that 2007 sales and earnings growth will slow, due to competition from traditional grocery stores and Wal-Mart (Charts). The forecast overshadowed the company's otherwise upbeat fourth-quarter report. Shares of Electronic Arts (up $6.24 to $59.24, Charts) rallied 12 percent in active trading. Late Thursday, the video game maker reported higher quarterly earnings and revenue that beat estimates and also boosted its full-year sales forecasts. Qualcomm (up $0.11 to $36.47, Charts) reported fiscal fourth-quarter earnings and sales late Thursday that rose from a year earlier and topped estimates. The company also issued a fiscal first-quarter forecast in a range setting the midpoint below analysts' estimates. Shares rose modestly. Market breadth was mixed. On the New York Stock Exchange, losers topped winners six to five on volume of 1.51 billion shares. On the Nasdaq, advancers topped decliners by a margin of nearly three to two on volume of 1.89 billion shares. Higher oil prices added to the market's troubles. U.S. light crude oil for December delivery gained $1.26 to settle at $59.14 a barrel on the New York Stock Exchange. Bond prices sank, with the yield on the benchmark 10-year note rising to 4.72 percent, up from 4.60 percent late Thursday. Bond prices and yields move in opposite directions. In currency trading, the dollar gained versus the euro and the yen. COMEX gold for December delivery rose $1.40 to settle at $629.20 an ounce. |
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