Major stock indexes finished modestly lower Friday, as a lackluster employment report fanned concerns about a slowing economy while easing fears that the Federal Reserve will raise interest rates at its Aug. 8 meeting. Slower job growth may have already been priced into the market, says Standard & Poor's Equity Research.
The Dow Jones industrial average edged down 2.24 points, or 0.02%, to 11,240.35, a rise of 0.2% on the week. The broader Standard & Poor's 500 index slipped 0.91 points, or 0.07%, to 1,279.36, finishing the week up 0.1%. The tech-heavy Nasdaq composite dropped 7.28 points, or 0.35%, to 2,085.05, for a 0.4% weekly loss.
Meanwhile, NYSE breadth was slightly positive, with 19 issues advancing for every 15 declining. Nasdaq breadth was 17-13 negative.
A tame employment report cheered investors at the outset Friday. Nonfarm payrolls rose 113,000 in July, after an upwardly revised 124,000 in June, the Labor Department said. The increase was below expectations and will likely keep the Fed on the sidelines next week, though policymakers may leave the door open to futher interest-rate hikes, says Action Economics.
Other analysts generally shared the view that the Fed would refrain from raising rates at its Aug. 8 meeting. "The inflation numbers are still running a little hot, but inflation is a lagging indicator and there is plenty of precedent for the Fed stopping before inflation peaks," says Ed Keon, senior vice president and director of quantititative research at Prudential.
Still, some say the Fed faces a tough call, particularly as the report showed a 0.4% rise in average hourly earnings. "While the decision is clearly close and could go either way, we think the balance still tilts in the direction of one more rate hike for the road," says Goldman Sachs.
The Fed meeting is the main event next week. Data releases are slated to include second-quarter productivity, July retail sales and June international trade.
On the company side, investors weighed another case of stock-options accounting problems. Apple (AAPL) was lower after the computer maker said it would probably restate past earnings following an internal investigation into options backdating that found suspicious grants.
Downbeat news continued for homebuilders. Hovnanian Enterprises (HOV) was lower after guiding its fiscal third-quarter earnings lower to a range of $1.10 to $1.20 a share, from $1.40 to $1.50 a share.
Shares of Toyota (TM) rose after the automaker posted a 39% jump in profit for its fiscal first quarter.
Tire maker Goodyear Tire & Rubber (GT) was higher after reporting a decline in second-quarter profit on lower-than-expected revenue.
Banana producer Chiquita Brands (CQB) was up sharply after posting lower second-quarter earnings despite a 21% sales rise. Wachovia reportedly raised its recommendation on the stock from market perform to outperform.
Earnings season continues next week. Cisco (CSCO), General Electric (GE), Disney (DIS), and Target (TGT) are among companies set to announce quarterly results.
Elsewhere, Chicago Mercantile Exchange Holdings (CME) was higher on news it will join the S&P 500 index on Aug. 10, replacing Kerr-McGee (KMG).
In the energy markets Friday, September West Texas Intermediate crude oil futures fell 73 cents to $74.73 a barrel as hurricane fears continued to subside.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index bounced 51 points, or 0.87%, to 5,889.4. Germany's DAX index gained 83 points, or 1.47%, to 5,723.03. In Paris, the CAC 40 index was up 57.27 points, or 1.15%, to 5,040.95.
Asian markets finished mixed. Japan's Nikkei 225 index nudged up 28.81 points, or 0.19%, to 15,499.18. In Hong Kong, the Hang Seng index declined 160.62 points, or 0.94%, to 16,887.8. Korea's Kospi index climbed 12.46 points, or 0.96%, to 1,304.51.
Treasury yields sank after the mild employment report. The 10-year note rose in price to 101-23/32 for a yield of 4.9%, while the 30-year bond surged to 92-14/32 for a yield of 4.99%.