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Stocks fall on good jobs report Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aNtnPBNj.i9M&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aNtnPBNj.i9M&refer=home
U.S. Stocks Fall on Jobs Report; Citigroup, Pulte Shares Drop
May 7 (Bloomberg) -- U.S. stocks declined after a report that showed a bigger-than-expected increase in jobs and a surge in oil prices added to concern the Federal Reserve may boost its benchmark lending rate next month.
``We have rising rates in front of us and that's going to pressure the market,'' said Bob Sitko, who helps manage $29 billion at USAA Investment Management Co. in San Antonio. ``These numbers are bad for stocks short-term.''
Shares of banks, homebuilders and retailers fell on concern that higher interest rates will reduce demand for loans, make new homes less affordable and slow consumer spending. Citigroup Inc., Pulte Homes Inc. and Home Depot Inc. dropped.
The Standard & Poor's 500 Index lost 12.72, or 1.1 percent, to 1101.27 as of 3:37 p.m. in New York. The Dow Jones Industrial Average shed 106.67, or 1 percent, to 10,134.59. The Nasdaq Composite Index dropped 9.72, or 0.5 percent, to 1928.02.
More than 10 stocks fell for every one that rose on the New York Stock Exchange. Some 1.4 billion shares changed hands on the Big Board, 5.2 percent more than the same time a week ago.
For the week, the S&P 500 has lost 0.5 percent and the Dow has declined 0.9 percent. The Nasdaq has gained 0.4 percent.
The S&P 500 has shed 4.8 percent since its 2004 high on Feb. 11, erasing its gain for this year, on concern higher rates will slow profit growth.
Jobs and Stocks
U.S. companies added 288,000 workers in April and the unemployment rate fell to 5.6 percent. Economists had expected payrolls would rise by 170,000, according to a Bloomberg News survey. Jobs were added in manufacturing, construction and temporary help services.
The increase follows a revised gain of 337,000 jobs in March that was larger than estimated last month, said the Labor Department. Manufacturers added jobs for a third straight month.
``We're in a counterintuitive phase of the market where good news is bad news,'' said Art Hogan, chief market analyst at Jefferies & Co. in Boston. ``This pushed more people into the camp that the Fed raises rates in June rather than August.''
The Federal Reserve said Tuesday it will boost interest rates from 1 percent, a 45-year low, at a ``measured'' pace to curb inflation.
Rate Forecasts
Wall Street firms are moving up their forecasts for the Fed to begin raising interest rates, some as early as next month. J.P. Morgan Chase & Co., Bear, Stearns & Co., Nomura Securities International, Bank of America and Morgan Stanley, five of the 23 primary dealers that trade government securities directly with the Fed, expect the Fed to boost its target rate to 1.25 percent at its June 30 meeting, from a previous August forecast.
Still, investors such as Duane Roberts, who helps manage $500 million at Dana Investment Advisors Inc. in Grapevine, Texas, say the increase in jobs will help U.S. stocks.
``I'd much rather have a strong jobs picture and rising interest rates than the other way around,'' Roberts said. ``If the Fed takes a slow and steady approach to raising interest rates, earnings will be able to keep up.''
Crude oil futures surged to $40 a barrel for the first time since the Iraqi invasion of Kuwait in 1990 on increased concern about rising U.S. gasoline demand and limited refining capacity. Investors have said that higher gasoline prices dent consumers' spending. Twenty-eight of the 30 stocks in a S&P 500 retailing index fell.
Banks Decline
An index of banks and financial companies contributed the most to the S&P 500's drop among the benchmark's 10 industry groups. Citigroup, the world's biggest financial services company, lost 67 cents to $46.84.
Pulte fell $1.66 to $46.72, leading an index of homebuilders down 4.3 percent. Home Depot, the world's largest home- improvement chain, declined $1.29 to $33.07.
An index of companies that produce raw materials such as steel and copper slid 3.3 percent, for the biggest decline among the S&P 500's 10 industry groups. The measure jumped 29 percent in the second half of 2003, leading the S&P 500's advance.
U.S. Steel Corp., the largest steelmaker in the Americas, lost $2.08 to $26.17, Phelps Dodge Corp., the second-biggest copper producer in the world, fell $5.13 to $60.80 and Georgia- Pacific Corp. slumped $2.17, or 6.3 percent, to $32.50.
Symbol Technologies Inc. fell 81 cents to $12.04. The world's largest seller of bar-code scanners said its request for a retrial in a $218 million jury verdict was denied.
Krispy Kreme Doughnuts Inc., the No. 2 U.S. doughnut chain, plunged $8.26, or 26 percent, to $23.54. The company cut its fiscal 2005 profit forecast by 10 percent because the popularity of low-carbohydrate foods has reduced demand.
Technology Shares
Technology shares rose after the price for the most widely used computer-memory chip had its biggest increase in a month. An index of computer-related companies had the only gain among the S&P 500's 10 groups.
Intel Corp., the world's biggest chipmaker, added 63 cents to $26.61. Cisco Systems Inc., the largest maker of equipment to link computers, gained 40 cents to $21.90.
Texas Instruments Inc., the No. 1 maker of chips that power cellular phones, rose 42 cents to $25.50. PMC-Sierra Inc., a maker of chips for telecommunications equipment, jumped 56 cents to $13.78. The 4.2 percent gain was the biggest in the S&P 500.
The Philadelphia Semiconductor Index added 5.4 percent as 14 of its 18 members advanced.
``The chip stocks tend to do very well when there is economic growth,'' said Ray Rund, a semiconductor analyst at Shaker Investments Inc., which manages $800 million in Cleveland. ``If interest rates are going to rise, it is because there is going to be economic growth.''
Fannie Mae
Fannie Mae, the largest buyer of U.S. mortgages, lost $1.04 to $67.84. The company improperly accounted for some bonds backed by manufactured housing and aircraft leases, and must further write down the investments' value, its federal regulator said.
National Commerce Financial Corp., a bank with a market value of more than $6 billion, jumped $3.66, or 13 percent, to $31.76 on speculation the company will be acquired. National Commerce said it's doing a review of ``strategic alternatives'' that will be completed ``shortly.''
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