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Shares Gain as Yields Tumble

A sluggish job report raises concerns that the economy will cool down fast. Oil jumps and builders' stocks suffer on a weakened outlook.

June 03, 2006|From Times Wire Services

Wall Street struggled to end mostly higher Friday after slower-than-expected growth in May employment pushed bond yields down but raised concerns that the economy might be cooling too quickly.

Most broad U.S. stock indexes finished with modest gains, and winners topped losers by 2 to 1 on the New York Stock Exchange and by a narrow margin on Nasdaq. The Standard & Poor's 500 index added 2.51 points, or 0.2%, to 1,288.22.

But the Dow Jones industrial average lost 12.41 points, or 0.1%, to settle at 11,247.87, and the technology-heavy Nasdaq composite slipped 0.45 point to 2,219.41.

The Labor Department's report that employers created a net 75,000 jobs in May was well below expectations, adding to evidence that the economy was slowing.

That helped drive Treasury bond yields down sharply, with the 10-year T-note yield tumbling to 4.99% from 5.10% on Thursday. Some analysts said the job data reinforced the view that the Federal Reserve should halt its credit-tightening campaign.

The stock market would be expected to cheer an end to rising interest rates -- unless investors worried that the Fed had already raised rates too high, risking recession.

"I think we're at a point now where going too far is a feasible risk," said Gregory Miller, chief economist for SunTrust Banks.

Another jump in oil prices added to investors' jitters. Near-term crude futures in New York rose $1.99 to $72.33 a barrel, a three-week high, after two days of declines. Traders said prices were pushed up after militants in Nigeria attacked an oil rig and on doubts that Iran would embrace new U.S.-backed efforts to rein in its nuclear program.

Gold rebounded $7.90 to $635.50 an ounce in New York futures trading after tumbling $14.90 on Thursday.

Stocks worldwide have recovered somewhat in recent days after heavy selling in May that stemmed from concerns about inflation and interest rates.

For the week, the S&P 500 rose 0.6% and Nasdaq gained 0.4%, but the Dow eased 0.3%.

The Russell 2,000 small stock index added 0.1% on Friday and was up 1.1% for the week.

Among Friday's highlights:

* Most home builders' shares fell after Pulte Homes slashed its projected full-year earnings, citing a steep drop in orders for April and May. That added to nervousness about the extent of the housing sector's slowdown. Pulte fell $1.70 to $31.33, KB Home lost 96 cents to $51.10 and Centex slid $1.45 to $47.59.

But many real estate investment trust shares rebounded from recent losses. Post Properties jumped $1.40 to $45.53, Tanger Factory Outlet rose $1.21 to $31.90 and General Growth Properties surged $1.33 to $45.78.

* Some investors turned to stock sectors that would be expected to hold up better than most if the economy weakened significantly. Utility stocks were among the day's winners. Southern Co. rose 63 cents to $32.62, Dominion Resources gained 93 cents to $74.20 and Public Service Enterprise jumped $1.12 to $67.03.

Drug stocks also were higher. AstraZeneca gained $1.02 to $54.67, Alcon added 79 cents to $109.04 and Novartis was up 76 cents to $56.40.

* Many commodity-related issues advanced despite concerns about the economy. Energy issues got a lift from higher crude prices. Marathon Oil jumped $1.58 to $78.39 and Valero Energy rose $1.55 to $63.05.

Copper miner Phelps Dodge rallied $1.95 to $86.94, Titanium Metals surged $1.55 to $39.96 and U.S. Steel advanced $1.11 to $69.51.

* Goldman Sachs inched up 54 cents to $154.09. As expected, the brokerage's board named Lloyd C. Blankfein chief executive, succeeding Henry M. Paulson Jr., whom President Bush nominated this week to be Treasury secretary. Blankfein is Goldman's president.

* Revlon plunged $1.13 to $1.91. The cosmetics company said it expected slower sales growth in 2006, reflecting less robust gains from its Vital Radiance and Almay product lines.

* In foreign trading, Mexico's stock market rose 1.5%, Brazilian shares gained 0.5% and the Hong Kong market rallied 1.7%. The German market slipped 0.4%.

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