Employment report fails to inspire Wall Street

Technology stocks led Wall Street lower today after an uninspiring employment report failed to ease investors’ concerns over Intel’s profit outlook. The major indexes finished the week mixed.

Investors were satisfied but not impressed by the Labour Department’s latest figures on unemployment, which fell to 5.4% from 5.5% 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.

The tech-focused Nasdaq composite index dropped 28.95, or 1.6%, to 1,844.48.

The Dow Jones industrial average fell 30.08, or 0.3%, to 10,260.20, while the Standard & Poor’s 500 index was down 4.68, or 0.4%, at 1,113.63.

For the week, the Dow gained 0.6% and the S&P rose 0.5%, while the Nasdaq fell 1%. 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 Labour 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 months highs of more than 49 per barrel.

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% 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 – does not 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 fell 77 cents to 10.90, Hewlett-Packard slipped 31 cents to 17.70 and Microsoft 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.

Pharmaceutical giant and Dow component Pfizer 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 would 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, saw a 38% jump in quarterly profits, despite rising employee health-care costs.

Mandalay nonetheless fell 7 cents to 67.78.

Declining issues outnumbered advancers by nearly 4 to 3 on the New York Stock Exchange, where volume was very light.

The Russell 2000 index of smaller companies was down 3.54, or 0.6%, at 556.24.