Dow drops 96 points

Solid employment data renewed Wall Street’s inflation worries and sent stocks skidding today, with a bond sell-off overshadowing a fresh drop in oil prices.

The major indexes ended the week little changed.

Although investors were encouraged by modestly better-than-expected job growth for March – signalling a healthy but not overheating economy – a rise in average hourly earnings again stoked concerns about a tight labour 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 would 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 sank 96.46, or 0.86%, to 11,120.04.

Broader stock indicators also fell after reaching five-year highs in the prior session. The Standard & Poor’s 500 index lost 13.54, or 1.03%, to 1,295.50, and the Nasdaq composite index fell 22.15, or 0.94%, to 2,339.02.

Bonds slumped alongside stocks, with the yield on the benchmark 10-year Treasury note jumping to 4.96% from 4.89% on Thursday.

Scott Merritt, US equity strategist for JPMorgan Asset Management, noted that the 10-year Treasury yield crossing 5% 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. “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 on 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.

In economic news, the Labour Department said employers added 211,000 jobs in March, above estimates for a 190,000 gain. Hourly earnings grew 0.2%, behind forecasts of 0.3%, and the nation’s unemployment rate slipped to 4.7%.

The Commerce Department said wholesale inventories grew 0.8% in February, a sharp upswing from a 0.2% January increase and beating economists’ prediction of 0.5%. Sales were flat for the period after two months of solid gains.

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

Along with the first taste of first-quarter earnings – Alcoa and General Electric 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 if investors continue being data-sensitive.

“I think it’s a trendless market,” he said. “Any (data) that comes out will be overinterpreted, overread and overreacted to.”

Research In Motion 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. Its first-quarter forecast also came in below Wall Street estimates.

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

Declining issues led advancers by more than 4 to 1 on the New York Stock Exchange, where volume of 1.54 billion shares lagged the 1.58 billion shares that changed hands on Thursday.

The Russell 2000 index of smaller companies dropped 10.10, or 1.32%, to 756.13.