Technology stocks led Wall Street lower Friday after an uninspiring employment report failed to mitigate investors’ concerns over Intel Corp.’s profit outlook. The major indexes finished the week mixed.
Investors were satisfied with — but not impressed by — the Labor Department’s latest reading on unemployment, which fell to 5.4 percent from 5.5 percent in July, and the 144,000 jobs created in August was close to the 150,000 Wall Street expected.
“I think this continues the pattern of decent economic growth,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “It’s not lighting a fire under anyone, nor is it suggesting the economy is on the edge of a serious contraction. So the market can focus elsewhere, with oil prices likely the biggest hinge for the market right now.”
One day after a sharp drop in crude oil sparked a major stock rally, a barrel of crude was quoted at $43.99, down 7 cents, on the New York Mercantile Exchange.
Meanwhile, profit warnings from Intel continued to weigh on the market, hurting not only technology shares but also raising concerns about third-quarter earnings in other sectors.
At the close, the tech-focused Nasdaq composite index was down 28.95 points, or 1.6 percent, at 1,844.48, while the Dow Jones industrial average was off 30.08 points, or 0.3 percent, at 10,260.20. The broader Standard & Poor’s 500-stock index was down 4.68 points, or 0.4 percent, at 1,113.63.
For the week, the Dow gained 0.6 percent and the S&P rose 0.5 percent, while the Nasdaq fell 1 percent. It was the fourth straight week of gains for the Dow and S&P, while the Nasdaq reversed direction after two positive weeks.
Due to the Republican National Convention and the usual slowdown in trading before Labor Day, volume on the major markets was extremely low during the week. Most of the trading during the week mirrored the vagaries of crude oil prices, which dropped from last month’s highs of more than $49 per barrel.
Many investors stayed out of the market altogether until the RNC safely concluded and the Labor Department’s jobs report gave them some insight into the strength of the economy. The light volume made it difficult for analysts to read any trends into the market’s activity this week.
While the gain in payrolls fell short of expectations, August’s new jobs were the most created since May and marked a full year of job growth across the nation. Job figures for June and July were also revised upward.
Combined with falling unemployment and a 0.3 percent increase in hourly earnings, the overall jobs picture was somewhat improved over the tepid growth seen this summer. However, analysts have said stronger growth would be needed to assure investors that the economic recovery was still on firm footing.
The Institute for Supply Management’s services index, like its manufacturing report earlier in the week, dropped sharply in August, falling to 58.2 from July’s reading of 64.8, reflecting a drop in consumer spending due to employment concerns and oil prices. The ISM noted that the service sector continued to grow, however.
The economy will likely need an additional boost in consumer spending, which — at least in the high-tech sector — doesn’t appear forthcoming. Intel slashed its third-quarter sales forecasts by up to $600 million, citing poor global demand for personal computers, and said its gross margins were falling as well. Intel tumbled $1.61 to $20.02.
Intel’s woes spread to other high-tech stocks, as rival Advanced Micro Devices Inc. fell 77 cents to $10.90, Hewlett-Packard Co. slipped 31 cents to $17.70 and Microsoft Corp. was down 51 cents at $27.11. HP, Microsoft and Intel are all Dow components, and their fortunes reflect the health of not only tech stocks, but of the industrial sector as well.
“Earnings drive the market, and earnings in semiconductors are not good. There’s been a big deceleration in growth,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “Most rallies are either led by consumer cyclicals or tech, and the strongest rallies are led by tech stocks. So we’re kind of stuck until we see techs recover, probably toward the end of the year.”
Pharmaceutical giant and Dow component Pfizer Inc. was down 15 cents at $32.55 after announcing it would pay $430 million to settle 171,611 lawsuits against a subsidiary that claimed injury from insulation products. Pfizer said it will take a $229 million charge in the third quarter for the settlement.
Hotel and casino operator Mandalay Resort Group, which is subject to pending acquisition by MGM Mirage Inc., saw a 38 percent jump in quarterly profits, despite rising employee health-care costs. Mandalay nonetheless fell 7 cents to $67.78.
Southwest Airlines Inc. dropped 72 cents to $14.25 despite reporting that its passenger traffic in August rose 11.3 percent from the previous year. The airline’s passenger load per plane rose to 75.1 percent, up from 73.2 percent a year ago.
Declining issues outnumbered advancers by nearly 4 to 3 on the New York Stock Exchange, where volume was very light. Overseas, Japan’s Nikkei stock average tumbled 1.2 percent. In Europe, Britain’s FTSE 100 closed up 0.7 percent, while Germany’s DAX index and France’s CAC-40 both climbed 0.9 percent.