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Stocks Decline Despite Brighter Payroll Report

Intel's reduced sales forecast hits Nasdaq especially hard. Trading is light before the holiday weekend.

September 04, 2004|Kathy M. Kristof | Times Staff Writer

A brighter job picture wasn't enough Friday to overcome Intel's gloomy sales outlook, with the major stock indexes falling in light trading at the start of the long holiday weekend.

The technology-heavy Nasdaq composite index was especially hard hit, falling 28.95 points, or 1.6%, to 1,844.48. Traders blamed the drop on Intel, which cut third-quarter revenue forecasts after the close of trading Thursday, citing weaker demand for personal computers and mobile phones worldwide.

"Today was all about Intel," said Gina Sanchez, portfolio manager at American Century Investment Management in Mountain View, Calif. "It really guided the rest of the Nasdaq and even leaked into the Dow."

The Dow Jones industrial average closed down 30.08 points, or 0.3%, at 10,260.20, after rallying modestly at the outset.

The broader Standard & Poor's 500 index of blue-chip stocks eased 4.68 points, or 0.4%, to 1,113.63.

Losing issues outpaced winners by 7 to 5 on the New York Stock Exchange.

For the week, the Dow was up 0.6% and the S&P 500 gained 0.5%, while Nasdaq fell 1%.

Friday's losses on Wall Street might have been even worse were it not for the August employment report, said Rob Morgan, investment strategist at Janney Montgomery Scott in Philadelphia.

The government reported that a net 144,000 jobs were created last month -- not quite as many as some economists anticipated but double the number for July and a sign that the economy is still growing. In addition, the government said unemployment duration -- the number of weeks that job seekers remained out of work -- fell for the first time since March 2001.

"It was soothing, not spectacular," Gary Schlossberg, economist at Wells Capital Management in San Francisco, said of the job report. "At least it's moving in the right direction."

Stock trading volume was about 30% below normal levels. Many Wall Street pros who hadn't left town before the just-concluded Republican National Convention made early getaways for the long weekend.

"Volume is nonexistent because people don't want to leave themselves exposed to any speculative bets when they're going away for three days," said Ernie Ankrim, chief investment strategist at Russell Investment Group in Tacoma, Wash.

Ankrim said that although the recent economic news had affirmed that the recovery was continuing, albeit slowly, there was still plenty of anxiety linked to uncertainties over oil prices, terrorism, the presidential election and the economy.

"It's like broadcasting a baseball game when both teams are still in the dugout waiting for the rain to stop," he said. "You have a market that's just waiting around."

Among Friday's highlights:

* Treasury bond yields rose on the job report, continuing a rebound that began on Thursday. By showing growth in the economy, the report affirmed expectations that the Federal Reserve will raise short-term interest rates this month and possibly once again before the year is over, traders said.

The yield on the benchmark 10-year Treasury note rose to 4.28% from 4.21% on Thursday. The two-year T-note yield ended at 2.57%, up from 2.46%.

* Intel fell $1.58, or 7.3%, to $20.05 and helped depress the prices of a wide swath of other chip makers.

Sanchez of American Century said the fear was that Intel reflected deeper problems in the economy -- including the possibility that consumers were too worried or debt-burdened to continue spending.

Irvine-based Broadcom fell $1.61, or 8.23%, to $25.98. Texas Instruments dropped 96 cents, or 5.8%, to $19.17. Xilinx sank $1.66, or 9%, to $25.95.

* Oil prices slipped after two days of gains. U.S. crude futures lost 7 cents to $43.99 a barrel.

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