Stocks finished in the minus column on Friday, as a lackluster update from blue-chip semiconductor maker Intel (INTC) trumped a report showing modest improvement in the labor market. Trading volume was thin ahead of the Labor Day holiday on Monday.
The Dow Jones industrial average lost 30.08 points, or 0.29%, to 10,260.20. The broader Standard & Poor's 500 index was down 4.68 points, or 0.42%, to 1,113.63. The Nasdaq composite index saw the worst of the selling, shedding 28.95 points, or 1.55%, to 1,844.48.
Looking to next week, the stock market is closed Monday in observance of Labor Day.
Among major economic reports slated for release during the week: the Federal Reserve's Beige Book anecdotal update on economic conditions, weekly jobless claims, import prices in August, July wholesale prices, and the August producer price index. Also, Fed chairman Alan Greenspan is scheduled to testify before the House Banking Committee on Wednesday.
Next week brings earnings updates from Neiman Marcus Group (NMG.A), Hovnanian Enterprises (HOV), Comverse Technology (CMVT), National Semiconductor (NSM), and Jos. A. Bank Clothiers (JOSB).
On Friday, Intel's mid-quarter update raised concerns that spending by consumers and businesses is softening. The softer-than-expected report casts doubt over the third-quarter earnings season and the overall strength of economic recovery.
The chipmaker said third-quarter revenue will range from $8.3 billion to $8.6 billion, down from a previous forecast from $8.6 billion to $9.2 billion for the three-month period ending Sept. 25. The company projects third-quarter margin to range from 56% to 60%, down from its previous estimate of 58% to 62%. The shares fell 7% on the session, to a 52-week low, and peers Advanced Micro Devices (AMD), ASML Holding (ASML), and Xilinx (XLNX) each fell 6% to 7%.
The latest economic news, however, was somewhat more comforting. Some 144,000 jobs were created in August and the unemployment rate fell to 5.4%, the lowest rate since October, 2001. The report overall was firmer than expected, including upward revisions to June and July data, says Action Economics.
The data were supportive of a more positive economic outlook, says Action Economics' Mike Englund. Initial weakness in June and July appear to have been "noisy gyrations in the monthly surveys around an established trend that will be difficult for economists to argue against."
"It was a good number all around," says Andy Valerie, equity strategist at Boston-based brokerage LPL Financial, noting that the economy in June and July added 62,000 jobs more than reported earlier. He adds that companies are still trying to increase productivity from existing workers, rather than hiring.
The annualized growth pace of hours worked is 3.4% in the third quarter, vs. the second quarter. "This has quite negative implications for productivity growth in the third quarter," says Goldman Sachs' economics department.
Separately, the Institute of Supply Management index on the services sector came in at 58.2 in August, below the consensus expectation of 64.8.
Among Friday's earnings reports, Mandalay Resort Group (MBG) reported a 38% rise in second-quarter profit, though results were short of analyst forecasts due to higher health care costs and a higher rate of winning gamblers. It reported net income of $58.2 million, or 85 cents per share, up from $42.3 million, or 67 cents per share, a year ago.
Pall (PLL), a purification and filtration systems maker, said fourth-quarter earnings rose slightly on strength in its industrials business. It reported earnings after restructuring and other charges of $55.6 million, or 44 cents per share, for the quarter ended July 31, up from $54.6 million, or 44 cents per share a year earlier.
On Friday, crude-oil futures rose to $44.15 a barrel as pipeline sabotage in northern Iraq renewed supply fears and drove prices higher worldwide.
U.S. Treasury issues closed lower in price Friday in a holiday-shortened session as the jobs report showed acceleration in August. The yield on the benchmark 10-year note rose to 4.29%. The bond market will be closed on Monday for the Labor Day holiday.
European stock markets finished higher Friday on strength in oil concerns and reassuring jobs data in the U.S. The Financial Times-Stock Exchange 100 index in London added 29 points, or 0.64%, to 4,547.6.
Germany's DAX index was up 37.4 points, or 0.98%, to 3,870.85. In Paris, the CAC 40 index was up 34.48 points, or 0.95%, to 3,665.94.
Asian markets finished lower. Japan's Nikkei 225 index shed 130.26 points, or 0.17%, to close at 11,022.49, led lower by chip stocks following Intel's mid-quarter report. In Hong Kong, the Hang Seng index lost 50.97 points, or 0.39%, to close at 12,948.1.