Tags: Employment | Report | Whacks | Market

Employment Report Whacks Market

Friday, 07 September 2001 12:00 AM

The blue-chip Dow Jones industrial average, which plunged 192.43 points Thursday, was down another 234 points, or 2.39 percent, to close at 9,605.85. The tech-heavy Nasdaq composite index, which sank 53.37 points in the previous session, was down 17.99 points, or 1.05 percent, to close at 1,687.65.

The broader New York Stock Exchange composite index dropped 11.14 points to close at 566.17, and the Standard & Poor's 500 index was down 20.62 points to close at 1,085.78.

The American Stock Exchange composite index dropped 6.91 points to close at 856.42. The Wilshire Smallcap Index was down 14.32 points to close at 856,42.

The broad Wilshire 5000 dropped by 185.65 points to close at 10,066.49, below its April 4 bottom of 10,068.63.

For this first week of September, the Dow fell overall by 3.5 percent, the Nasdaq slid by 6.5 percent, and the S&P 500 dropped by 4.2 percent.

The Nasdaq and S&P 500 were down for the eighth time in the last nine trading sessions.

Trading volume for Friday was 1.4 billion on the Big Board and 1.7 billion on the Nasdaq.

Market breadth was markedly negative, with decliners beating advancers by 22 to 9 on the NYSE and by 2 to 1 on the Nasdaq.

Analysts said stocks sank in reaction to a Labor Department report showing the nation's unemployment rate surging in August as employers slashed a surprising 113,000 jobs amid the stubbornly sluggish economy.

The unemployment rate jumped to 4.9 percent from 4.5 percent in July, far weaker that 4.6 percent economists expected. Payrolls missed expectations for a 43,000 decline.

Businesses added 13,000 positions in July, but the Labor Department attributed the drop in August payrolls to continued reductions in the manufacturing industry, which cut 141,000 jobs - the largest amount this year.

Since July 2000, the manufacturing industry has lost more than 1 million jobs, according to the Labor Department.

The August unemployment rate, while still low by historical standards, is at its highest since September 1997. The rate has risen steadily from 3.9 percent last October as the economy has rapidly lost steam.

Most market watchers said the sharp drop in payrolls was another piece of conclusive evidence that the economy remains mired in a slump.

Many believe the Federal Reserve is likely to cut interest rates at least one more time at its Oct. 2 policy-meeting.

The Fed has cut rates seven times this year for a total of three percentage points, and the target for the federal-funds rate sits at 3.5 percent.

Meanwhile, the Bush administration said that it was not surprised the unemployment rate jumped in August because unemployment is a lagging economic indicator and growth was so slow in the second quarter.

"Historically, unemployment is a lagging indicator of the economy. Given the fact that the second quarter showed such slow growth of 0.2 percent, it was expected unemployment would rise," White House spokesman Ari Fleischer said.

Meanwhile, U.S. Treasury prices rallied, lifted by the prospect of further rate cuts. Treasuries are most sensitive to the Fed's monetary easing. The 30-year bond rose 15/32 to yield 5.385 percent, and the 10-year Treasury note gained 15/32 to yield 4.81 percent.

In Europe, stocks ended lower in moderate trading in London, Frankfurt and Paris, knocked down by concerns over the U.S. economy following the August employment report.

The London International Stock Exchange's blue-chip FTSE-100 index sank 126.3 points, or 2.43 percent, to 5,078.0. The German DAX index fell 144.70 points to close at 4,757.73 and the French CAC-40 index lost 67.33 points to close at 4,413.51.

Earlier in Asia, prices on the Tokyo Stock Exchange ended lower, knocked down by growing concerns about the U.S. economy and after the Japanese government said the economy's output shrank at an annualized rate of 3.2 percent in the three months to June 30. Japan's blue-chip Nikkei 225 Stock Average, which rose 51.54 points Thursday, fell 133.54 points, or 1.25 percent, to 10,516.79 after briefly touching a new 17-year intraday low of 10,405.80.

Japan's gross domestic product released ahead of the market's open for the April-June period was slightly better than the market had expected, yet it fell far short of creating any optimism or blunting the impact of the recent meltdown on global markets.

GDP shrank a real 0.8 percent in the April-June period from the first quarter, for an annualized 3.2 percent drop, as the global downturn battered the economy and domestic demand faltered.

The market had been expecting a 1.0 percent quarter-on-quarter decline, according to average forecasts, but nonetheless, the data showed that nearly every engine of economic growth misfired in the second quarter. Domestic demand, exports and public spending were all lower.

But some economists said Japan's economy is in worse shape than the figures suggest because nominal GDP shriveled 10.3 percent, a signal of severe deflation.

After the release of the GDP data, Prime Minister Junichiro Koizumi ordered the Cabinet to compile measures to shore up the economy and boost jobs, at the same time vowing to minimize the supplementary budget in the interest of fiscal reform.

The market's reaction to the proposed economic props was limited, analysts said.

Elsewhere in Asia, prices ended sharply lower in moderate trading on the Hong Kong Stock Exchange, knocked down amid concerns about the United States economy, Hong Kong's second biggest export market. The blue-chip Hang Seng Index sank 280.12 points, or 2.63 percent, to 10,384.20, its lowest level since March 1999.

Meanwhile, prices ended slightly lower on the Taiwan Stock Exchange, pressured by weakness in chipmakers. The Weighted Index lost 36.10 points, or 0.83 percent, to 4,302.16.

Prices on the South Korean Stock Exchange ended fractionally higher, erasing early losses. The Kospi composite index added 2.49 points, or 0.45 percent, to 555.08.

Elsewhere around the region, prices on the Australian Stock Exchange ended lower. The All Ordinaries Index lost 29.70 points, or 0.93 percent, to 3,178.70.

Copyright 2001 by United Press International.

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The blue-chip Dow Jones industrial average, which plunged 192.43 points Thursday, was down another 234 points, or 2.39 percent, to close at 9,605.85. The tech-heavy Nasdaq composite index, which sank 53.37 points in the previous session, was down 17.99 points, or 1.05...
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2001-00-07
Friday, 07 September 2001 12:00 AM
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