US stocks fall as oil price rises

Wall Street ended a dismal week with its third decline in a row today after oil prices jumped on word of a possible string of attacks in Nigeria near production facilities.

The rise in oil prices sapped enthusiasm over a Labour Department report that US unemployment rate fell to a five-year low.

The Dow Jones industrial average logged its first six-day consecutive drop since June 2005 after light, sweet crude rose $1.27 to $59.15 on the New York Mercantile Exchange. US diplomats in Nigeria warned that militants are planning a series of kidnappings and bombing attacks in the coming days in areas where oil is extracted.

The Labour Department said the unemployment rate fell to 4.4% last month from 4.6% in September, easing some concerns that the US economy has slowed too quickly.

For more than a week, investors have been nervous about the strength of the US economy following a stream of disappointing data. While Wall Street wants growth to cool so the threat of inflation will dissipate and the Federal Reserve can cut interest rates, a precipitous slowdown could slice into consumer spending and corporate profits.

Alan Gayle, senior investment strategist and director of asset allocation for Trusco Capital Management, said the employment figures suggested the US economy has more power than expected going into the holiday spending season but warned that the strength could make the Fed uneasy.

“Investors have to digest the notion that the Fed is going to remain poised to lift interest rates as we go into 2007.”

The Dow closed down 32.50, or 0.27%, at 11,986.04.

Broader stock indicators were also lower. The Standard & Poor’s 500 index closed down 3.04, or 0.22%, at 1,364.30, and the Nasdaq composite index fell 3.23, or 0.14%, to 2,330.79.

For the week, the Dow fell 0.86%, while the S&P lost 0.95% and the Nasdaq lost 0.84%.

Today’s economic data sent bonds falling sharply; the yield on the benchmark 10-year Treasury note jumped to 4.71% from 4.60% on Thursday. The dollar was mixed against other major currencies, while gold prices rose.

Though the 92,000 new jobs last month fell short of the 125,000 economists expected, figures for August and September were revised upward. October was the third straight month of decline for the unemployment rate.

The markets showed little reaction to a second dose of good economic news Friday. The Institute for Supply Management, an organisation of corporate purchasing executives, said its index of the service sector rose to 57.1 in October from 52.9 in September; the reading was stronger than expected.

Last month, investors believing a soft landing was in the offing sent stocks higher; the Dow and other indexes rose more than 3%.

But this week Wall Street has been casting about as it tries to reconcile its desire for a slowdown with weak economic readings. There was a sense among many investors that perhaps Wall Street was getting too much of what it wanted in the form of weak economic news, while other observers regarded the news as merely turbulence that accompanies even a soft landing in the economy.

“This is what it’s like to live in a data-dependent market,” Gayle said of the reaction to the jobs report. ”We may see a near-term correction after a couple of months of strong performance.

That’s not be unexpected. Fundamentally, the market seems to be reasonably valued and fundamentally sound.”

Today brought another batch of mixed earnings reports. Electronic Arts Inc, the video game maker, reported stronger-than-expected results, while the grocery chain Whole Foods Market lowered its 20007 forecast.

Electronic Arts jumped 6.24, or 11.8%, to 59.24 after its fiscal second-quarter profit proved to be better than Wall Street expected and the company raised its forecast for the year.

Whole Foods, however, warned Wall Street that the coming year will be one of transition and that sales gains will likely moderate. Whole Foods fell 13.86, or 23%, to 46.26.

Red Robin Gourmet Burgers fell 12, or 26%, to 34 after the restaurant chain reported a weaker-than-expected third-quarter profit and reduced its full-year forecast.

Duke Energy fell 40 cents to 31.09 after reporting that lower natural gas prices, plant outages and increased costs hurt third-quarter results.

Declining issues outnumbered advancers by about 6 to 5 on the New York Stock Exchange, where volume came to 1.51 billion shares compared with 1.67 billion traded on Thursday.

The Russell 2000 index of smaller companies rose 2.60, or 0.35%, to 752.73.