Friday, October 6, 2006

Stocks End Lower on Weaker Employment

News Article
October 6, 2006

Business Week Online

Stocks End Lower on Weaker Employment

September nonfarm payrolls rose less than expected after an upwardly revised jump in August. Also in focus: GM, Google

Stocks finished modestly lower Friday, though off their weakest levels, as investors weighed a labor report showing an unexpectedly small increase in September payrolls. The Dow Jones industrial average was coming off three consecutive all-time closing highs.

The Dow slipped 16.48 points, or 0.14%, to 11,850.21, pulling back from Thursday's record 11,866.69 close and new all-time intraday peak of 11,870.06. The broader Standard & Poor's 500 index fell 3.64 points, or 0.27%, to 1,349.58. The tech-heavy Nasdaq composite lost 6.35 points, or 0.28%, to 2,299.99.

NYSE breadth was decidedly negative, with 21 issues declining for every 12 advancing. Nasdaq breadth was 17-13 negative.

A mixed report on the labor market was in focus Friday. Nonfarm payrolls rose a meager 51,000 in September, less than half the projected number, after a big upward revision to 188,000 in August. Average hourly earnings rose 0.2%, while the unemployment rate fell to 4.6% from 4.7%.

The report was stronger than it appeared on first blush, analysts say. "The headline job figures was well below consensus, but we wouldn't necessarily term this report 'weak,'" says Action Economics.

The release of September retail sales highlights next week's calendar. The economic docket also includes the Federal Reserve's Beige Book report and the minutes from the Fed's Sept. 20 monetary policy meeting, along with data on September import prices and August international trade.

Third-quarter earnings season also kicks off next week. Alcoa (AA ) is set to post quarterly results Oct. 10, followed by Costco (COST ) and PepsiCo (PEP ) on Oct. 12.

In corporate news Friday, General Motors (GM) was down on reports Jerome York, ally of billionaire investor Kirk Kerkorian, is quitting the company's board after alliance talks with fellow automakers Nissan (NSANY ) and Renault broke down.

On the upside, Google (GOOG ) was higher as the Internet search giant was reportedly in talks to buy online video outfit YouTube for about $1.6 billion.

Elsewhere, Micron Technology (MU ) was sharply lower after the flash-memory product maker posted a 47% increase in fourth-quarter profit, below analyst expectations.

M&A activity also continued to percolate. Cell-phone tower company Crown Castle International (CCI ) agreed to acquire smaller rival Global Signal (GSL ) in a $5.8 billion deal.

Communications equipment maker Avaya (AV ) was down on news it will take a $54 million charge in the fourth quarter related to job cuts.

Shares of Chattem (CHTT ) surged on news the company is acquiring five over-the-counter brands for $410 million from Johnson & Johnson (JNJ ) and Pfizer (PFE ).

In the energy markets, November West Texas Intermediate crude oil futures fell 27 cents to $59.76 a barrel as traders shrugged off talk of production cuts.

European markets finished mixed. In London, the Financial Times-Stock Exchange 100 index slipped 3.3 points, or 0.05%, to 6,001.2. Germany's DAX index rose 10.54 points, or 0.17%, to 6,085.82. In Paris, the CAC 40 index shed 6.47 points, or 0.12%, to 5,282.06.

Asian markets ended modestly lower. Japan's Nikkei 225 index declined 13.27 points, or 0.08%, to 16,436.06. In Hong Kong, the Hang Seng index edged down 4.28 points, or 0.02%, to 17,903.39. Korea's Kospi index was closed for a holiday after it on Wednesday tumbled 22.22 points, or 1.62%, to 1,352.

Treasury Market

Treasury yields climbed on the upward payrolls revision. The 10-year note fell in price to 101-13/32 for a yield of 4.7%, while the 30-year bond dropped to 94-25/32 for a yield of 4.84%.

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