WALL STREET Jobs-growth data send stocks down
The increase in jobs leads to predictions the Fed will raise interest rates.
NEW YORK (AP) -- Investors succumbed again to interest rate fears Friday, sending stocks tumbling after the government reported blistering job growth in April that far exceeded Wall Street's expectations. The Dow Jones industrial average skidded more than 120 points.
The jobs data gave further credence to predictions that the Federal Reserve would raise the benchmark lending rate by at least a quarter percentage point at its next meeting in June. Many analysts expressed frustration that the market's weeks-long angst over rates was distracting investors from a very positive economy and strong corporate earnings.
"Eventually, we're going to have to come to the realization that the reason rates are rising is because of solid economic growth," said Chris Conkey, deputy chief investment officer at Evergreen Investments. "The Fed has clearly indicated that they're going to raise rates, and maybe that will let us start the transition into other opportunities."
According to preliminary calculations, the Dow Jones industrial average plummeted 123.92, or 1.2 percent, to 10,117.34. Declining issues outnumbered advancers by an impressive 8-to-1 margin on the New York Stock Exchange, where volume was moderate.
Broader stock indicators also slid. The Standard & amp; Poor's 500 index was down 15.30, or 1.4 percent, at 1,098.69, and the Nasdaq composite index lost 19.78, or 1 percent, to 1,917.96.
For the week, the Dow lost 108.23, or 1.1 percent, the S & amp;P 500 fell 8.61, or 0.8 percent, and the Nasdaq dropped 2.19, or 0.1 percent. It was the second straight week of declines for all three major indexes, which hit their lowest levels since March 24.
The latest payroll figures from the Labor Department showed that the economy added 288,000 jobs in April, far outstripping economists' predictions of 165,000 new jobs. March's huge figure of 308,000 was revised higher to 337,000, and the data showed a jump in manufacturing jobs for the past three months, which were thought to be lagging. The Labor Department also reported a drop in the overall unemployment rate from 5.7 percent to 5.6 percent.
Economy's impact on markets
The economy's strengths could be compelling for investors, if they have indeed moved past interest rate concerns. The jobs data showed the prospect of higher long-term earnings growth as companies appeared to be adding jobs and expanding their enterprises instead of merely eking additional productivity out of current operations.
"You look at this data, and you see that corporate demand must be stronger than we even think," said Brian Pears, head equity trader at Victory Capital Management. "The only way companies feel they can grow revenue at this point is to hire staff, and that's really good."
The Fed, which promised this week to take a "measured" approach to raising interest rates from their 46-year low of 1 percent, will likely remain cautious about raising rates too quickly, as an increase in the cost of capital borrowing could harm further earnings growth.
"And you have to ask, where's the inflation going to come from anyway?" said Joseph Battipaglia, chief investment officer at Ryan Beck & amp; Co. "The only way inflation is going be a factor is if we have a bottleneck in commodity prices or a labor crisis of some kind, and I don't foresee anything like that. The Fed can move gradually."
Friday's corporate earnings reports were mixed, though overall earnings for the quarter remained strong throughout the market. Martha Stewart Living Omnimedia Inc. fell 21 cents per share below analysts' estimates of its quarterly losses, blaming lower advertising revenue and the fallout from Stewart's felony conviction. Martha Stewart Living lost 61 cents to $9.09.
Spanish-language broadcaster Univision Communications Inc. jumped 43 cents to $32.70 after doubling its first-quarter profits from a year ago, based on higher ratings and strong ad revenues.
"Finding Nemo" helped Pixar Inc. find a treasure trove of profits based on DVD sales of the wildly popular film. Though Pixar beat Wall Street expectations by 7 cents per share, it nonetheless fell $2.24 to $63.82.