Stocks twist and turn to end week
Markets mixed as investors hoped a weak jobs report would allay inflation fears, but ended up with a number far from estimates.
NEW YORK (CNNMoney.com) - U.S. stocks ended mixed Friday, ending a topsy-turvy day as investors struggled with a key jobs report that on one hand eased inflationary pressure yet also raised serious concerns over the nation's economic health.
The Dow Jones industrial average (down 12.41 to 11,247.87, Charts) fell 0.1 percent, while the broader Standard & Poor's 500 index (Charts) rose 0.2 percent. The Nasdaq composite (down 0.45 to 2,219.41, Charts) ended little changed.
All three gauges were higher, lower and unchanged at some point during the day.
Major gauges ended the first week in June mixed, with the Dow falling 0.2 percent while the S&P 500 and Nasdaq both rose 0.4 percent. This follows a broad selloff in May that saw the Nasdaq slide 6.2 percent, the Dow lose 1.8 percent and the S&P fall 3.1 percent.
Next week investors will have few earnings reports and relatively light week of economic news to help them determine if the market is headed for a broader decline or if May's loss was just a short correction.
"I don't think the lows for the year are in," said David Briggs, head of equity trading at Federated Investors. "But we probably won't have a bear market."
Friday's mixed bag
In a much-anticipated morning release, the Labor Department said employers added only 75,000 new workers to their payrolls in May, compared with the 175,000 that economists had expected.
Average hourly wages also rose less than expected, gaining only 0.1 percent after a 0.5 percent rise in April, which had stirred some inflation fears. Economists had forecast only a 0.3 percent gain in May. (For more on the jobs report, click here.)
While investors were hoping for a weak number that might lead the Fed to stop raising interest rates, one analyst said the jobs number was so small that it causes concern the economy may be headed for downturn.
'I think this was a horrible number," said Briggs, "It means the economy is falling down."
Briggs said the low number overshadowed any positive effect a halt in interest rate hikes might have.
"Yippee, the Fed might pause," he said with more than a tinge of sarcasm. "I'm a growth guy."
Other analysts shared Briggs' view.
"It was like, 'Wow,'" said Hugh Johnson, chairman of the asset management company Johnson Illington Advisors. "What we're seeing today is the 'R' jitters."
While Johnson said he didn't believe the economy is headed for a recession, he fully expects the Fed to stop raising rates at its next meeting.
But others weren't so sure.
"You can't say they aren't going to raise rates again based on one report," said Harry Clark, chief executive of Clark Capitol Management. "If you look at market history we're still in rally mode."
Stocks' wishy-washy day could also be a case of buy on the rumor, sell on the news. Markets rallied Thursday, with the Dow and S&P gaining more than 1 percent and the Nasdaq rising 2 percent, on hopes the jobs report would be weak, but not too weak.
Investors have been picking apart any economic numbers of late, looking for clues as to what the Federal Reserve will do in regards to interest rates.
Unlike the last two years, when the Fed made it plain it would continue to raise rates at a measured pace, the central bankers have now said they simply don't know what will come next and are watching the economic numbers, just like everyone else.
Higher interest rates are generally seen as bad for business, as it makes the cost of borrowing money more expensive and limits capital that could otherwise be used to turn higher profits.
A report also said April factory orders fell, but not as much as expected.
The Commerce Department said April factory orders fell 1.8 percent in April. Economists were looking for a drop of 2.1 percent, according to Briefing.com.
Talks broke down between Microsoft (down $0.06 to $22.76, Research) and Adobe (up $0.28 to $29.00, Research) about a Microsoft plan to use the Adobe-developed electronic document software, called PDF, in Microsoft's Office software package. A Microsoft now expects an anti-trust lawsuit from Adobe.
Shares in Vonage (up $0.35 to $11.98, Research) rose over three percent after a report said the Internet phone provider may be forced to buy back some of the shares sold in its dismal IPO as a result of a technical error.
The July light crude futures contract settled down $1.99 to $72.33 a barrel on the New York Mercantile Exchange.
Major markets in Asia closed mostly higher Friday, while major European markets ended the day up but off earlier highs. NYSE Group (Research) reached agreement late Thursday to buy Paris-based Euronext, for about just under $10 billion, putting it ahead in the race to create the first trans-Atlantic stock exchange.
Treasury prices rallied on the jobs report, trimming the yield on the benchmark 10-year note to 4.99 percent from the 5.10 percent level reached late Thursday. The dollar fell against the yen and euro.
Market breadth was mixed. On the New York Stock Exchange, advancers beat decliners by a margin of nearly two to one on volume of 1.57 billion shares. On the Nasdaq winners edged out losers as 1.95 billion shares changed hands.
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