The jobs data were far worse than expected. The Labor Department said the economy added 1,000 jobs in December, well below the expectation for 150,000 jobs. The unemployment rate, however, fell to 5.7%, down from 5.9%.
Hiring in the retail sector declined by 38,000 and jobs in manufacturing continued to tumble, falling by 26,000 in the month -- the 41st straight month of decline.
The Dow Jones industrial average finished with a loss of 133.55 points, or 1.26%, at 10,458.89. The broader Standard & Poor's 500 index was off by 10.07 points, or 0.89%, to 1,121.85.
Among the Dow's weakest components: Alcoa (AA
), DuPont (DD
), General Motors (GM
), SBC Communications (SBC
) and AT&T (T
The tech-heavy Nasdaq composite index fell 13.33 points, or 0.63%, to 2,086.92.
Economists were quick to brush off the consequence of such disappointing job growth. "We believe the report understates the trend toward an improving job market," says UBS' economics team, noting the jobless rate fell by 0.6% in just six months. Consumer sentiment has improved significantly, company
surveys show plans to hire and manufacturing rose in December, the economists point out.
"I'm a bit puzzled by it," says Deloitte Research chief economist Dr. Carl Steidtmann, "because it runs counter to all the other labor-market data we've seen lately." He guesses seasonality may be a factor. "The flip side is that the productivity boom is still going on." Consumers should remain solid as tax refunds and home refinancings "still provide enough liquidity to put off the day when you really need employment growth."
Next week, investors can look forward to a crowded economic data calendar. On Wednesday, reports on mortgage applications, the producer price index, and the Beige Book, the Federal Reserve's anecdotal report on the economy, are due. On Thursday: initial jobless claims, consumer price index and Philadelphia Fed index. Friday brings updates on business inventories, industrial production and a read on the University of Michigan consumer sentiment index.
Major earnings releases next week include Intel (INTC
) on Wednesday and General Electric (GE
) on Friday.
In corporate news Friday, the fourth-quarter earnings season got underway with Dow member Alcoa's (AA
) update. The aluminum company appeared to beat analysts' expectations of 34 cents earnings per share, reporting 39 cents from continuing operations, vs. a 17 cents loss, on a 9% revenue rise. J.P. Morgan cut its estimates of the stock, saying the results benefitted from unusual items. Alcoa's share price has fallen 2.9%.
Ford Motor (F
) said it expects stronger earnings in 2004 as a result of cost-cutting and new vehicle introductions. The automaker guided for profits of $1.20 to $1.30 per share this year. Ford stock was 2.7% lower.
Regional supermarket chain Great Atlantic & Pacific Tea (GAP
) reported a smaller loss for its fiscal third-quarter, amid a $75 million gain from the sale of the company's coffee brand. The stock gained 27%.
Battery maker Rayovac (ROV
) was 9.9% higher after raising its first quarter EPS guidance to an upward range of 65 cents, due to strong battery and grooming sales. S&P reiterates its 'accumulate' rating of the stock.
U.S. Treasuries Friday ended with solid price gains as investors mulled a weaker-than-expected update on December payrolls. A weak employment climate should keep the Fed's accomodative interest rate policy intact. The Fed has maintained its target interst rate at 1% since June. The central bank lowered rates 13 times since January, 2001.
In an official statement, secretary of homeland security, Tom Ridge, lowered the U.S. terror alert to yellow, from its 'high' orange rating.
European stocks finished lower after the U.S. payrolls disappointment. London's Financial Times-Stock Exchange 100 index slipped 27.9 points, or 0.62%, at 4,466.30, amid a steep drop in shares of Shell and Royal Dutch. A report showed that the U.K.'s global trade deficit rose to 4.4 billion pounds, up from 4.2 billion in October.
In Paris, the CAC 40 slipped 17.93 points, or 0.5%, to 3,574.80. Germany's DAX index slipped 29.25 points, or 0.72%, to 4,016.18. The market had been aided a bit by a report showing that Germany's November exports rose 4.1%, despite the strong euro.
In Asia, stocks finished higher. Japan's Nikkei 225 index gained 127.40 points, or 1.18%, to 10,965.05. Weakness in bank issues could not offset strength in Toshiba, Canon, Sony and other technology issues. Intel's buoyant comments this week also spurred the buying of tech stocks in Tokyo.
Hong Kong's Hang Seng index added 182.21 points, or 1.38%, to close at 13,385.80.