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Jobs data renew Wall Street’s inflation fears

Solid jobs data renewed Wall Street’s inflation worries Friday and sent stocks skidding, with a bond sell-off overshadowing a fresh drop in oil prices. The market’s main stock indexes ended the week little changed.
/ Source: The Associated Press

Solid jobs data renewed Wall Street’s inflation worries Friday and sent stocks skidding, with a bond sell-off overshadowing a fresh drop in oil prices. The market’s main stock indexes ended the week little changed.

Although investors were encouraged by modestly better-than-expected job growth for March — signaling a healthy but not overheating economy — an up tick in hourly earnings again stoked concerns about a tight labor market lifting wages and driving inflation, said Michael Gregory, a senior economist at BMO Nesbitt Burns.

“The fact that we’ve had some decent growth, as long as it isn’t associated with inflation risk, is generally good for equity markets,” Gregory said. “But we did see that wage pressure remains elevated. From that perspective, [the report] is neutral.”

Fears that the Federal Reserve will continue boosting interest rates to mitigate inflationary pressures triggered a second day of steep losses for the bond market, which contributed to stocks’ decline.

The Dow Jones industrial average finished Friday down 96.46 points, or 0.86 percent, while the broader Standard & Poor’s 500-stock index was off 13.54 points, or 1.03 percent. The technology-rich Nasdaq composite index lost 22.15 points, or 0.94 percent, having closed Thursday at a new five-year high.

Friday’s retreat left the market’s major indexes barely changed this week, with the Dow up 0.1 percent, the S&P 500 adding 0.05 percent and the Nasdaq off 0.03 percent. Mixed analyses of data on personal spending and the job market had stocks fluctuating as investors battled with interest rate concerns.

Bonds slumped alongside stocks, with the yield on the benchmark 10-year Treasury note jumping to 4.96 percent from 4.89 percent late Thursday. Scott Merritt, U.S. equity strategist for JPMorgan Asset Management, noted that the 10-year Treasury yield crossing 5 percent would be a negative factor for the market.

“Really what you’re seeing is a reaction of the equity market to bond yields,” Merritt said in an interview. “Higher interest rates mean future earnings are worth less, which means stocks are worth less.”

The dollar was mixed against most major currencies, and gold prices retreated after topping $600 per ounce Thursday for the first time since 1981.

Crude futures cooled after hitting the $68 level a day earlier, and as oil officials said some production in Nigeria could be restarted soon. A barrel of light crude fell 55 cents to settle at $67.39 on the New York Mercantile Exchange.

Before the open, the Labor Department said employers added 211,000 jobs in March, above estimates for a 190,000 gain. Hourly earnings grew 0.2 percent, behind forecasts of 0.3 percent; the nation’s unemployment rate slipped to 4.7 percent.

Along with a taste of first-quarter earnings — Alcoa Inc. and General Electric Co. are scheduled to release their results — next week brings a fresh round of reports on prices for imported goods, retail sales and consumer confidence. Analysts are waiting to see if consumers have weathered higher energy costs and interest rates, but Merritt said more erratic trading could be in store for a data-sensitive market.

“I think it’s a trend-less market,” he said. “Any [data] that comes out will be over interpreted, over read and over reacted to.”

Research In Motion Ltd. slid $4.60 to $79.78 after the company turned a small quarterly profit, which would have been more than six times greater if not for a $612.5 million settlement in its patent dispute with NTP Inc. Its first-quarter forecast also came in below Wall Street estimates.

Ford Motor Co. said President and Chief Operating Officer Jim Padilla is retiring after 40 years with the automaker. Chief Executive Bill Ford will assume his responsibilities. Ford fell 5 cents to $7.60.

Allstate Corp. said about a thousand employees accepted a voluntary buyout offer from the insurance firm, which was 300 more than the company expected. Allstate lost 58 cents to $51.22.

Late Thursday, coffee shop chain Starbucks Corp. posted a sharp 10 percent jump in same-store sales last month, lifted by seasonal promotions. Starbucks gained 41 cents to $37.86.

Overseas, Japan’s Nikkei stock average rose 0.42 percent. Britain’s FTSE 100 dropped 0.32 percent, Germany’s DAX index lost 1.3 percent and France’s CAC-40 was lower by 0.91 percent.