Stocks finished lower on Friday after a jump in the prices paid component of a manufacturing survey stoked inflation fears and oil prices surged. A report on new job growth came in weaker than expected.
The Dow Jones industrial average fell 99.46 points, or 0.95%, to 10,404.3. The broader Standard & Poor's 500 index was edged down 7.67 points, or 0.65%, to 1,172.92. The Nasdaq composite index lost 14.42 points, or 0.72%, to 1,984.81.
In the energy markets, NYMEX crude oil climbed as high as $57.70 a barrel, a new intraday record, before settling at $57.27, up $1.87. Despite inventories at levels above the same time last year, the market appears to be concerned with supply tightness as the summer driving period looms, says Action Economics.
Movements in the energy markets will probably continue to be a focus for investors next week, given that the economic calendar is light. A couple of reports about weekly retail sales will be released on Tuesday. On Thursday, weekly jobless claims, wholesale inventories, and consumer credit will be reported.
The earnings season kicks off on Wednesday with quarterly reports from Alcoa (AA), Bed Bath & Beyond (BBBY), and Monsanto (MON).
The main highlight Friday was the employment report, which showed weak new job growth. U.S. nonfarm payrolls rose a mere 110,000 in March, following a revised 243,000 in February (up 262,000 previously). This was far below economists' forecast for 225,000 new jobs.
However, the unemployment rate slipped to 5.2% from 5.4%. And average hourly earnings surged 0.3% from a revised 0.1% increase in February (previously unchanged), stronger than forecast. Average weekly hours were steady at 33.7. "The data will remove fears of a 50 basis-point Fed rate hike anytime soon," says Action Economics.
But investors seemed to focus on an inflation gauge in a national manufacturing survey. Prices paid in the Institute for Supply Management (ISM) report rose to 73.0 in March from 65.5. The ISM manufacturing index slipped to 55.2 in March after dipping to 55.3 in February.
There was also a mistaken early release of a 63.1 number for the ISM Non-Manufacturing index in March. "The full mix of figures reflect a vibrant factory sector despite the inevitable steady downtrend from the lofty levels that all these measures reached in early 2004," says Action Economics.
Construction spending rose 0.4% in February, following a revised 0.6% gain in January (up 0.7% previously). That's a little weaker than expected.
And the final University of Michigan Sentiment figures for March reflected little change in the overall headline figure, at 92.6 vs. the preliminary level of 92.9, but an even wider split between the performance of the current conditions and expectations measures, says Action Economics.
Among stocks in the news Friday, authorities were reported to be looking further into the accounting at American International Group (AIG). On Thursday, the insurance company confirmed that adjustments for improper accounting could cut its net worth by $1.7 billion.
Red Hat (RHAT) reported fourth-quarter earnings per share of 6 cents, vs. 3 cents a year ago, on a better-than-expected 56% revenue rise. The Linux services company set a $250-million stock buyback. Baird upgraded the stock to outperform from neutral, and S&P upgraded it to hold from sell.
Taser International (TASR) says it sees $10 million in first-quarter revenue. It says adverse publicity caused what it believes to be a temporary disruption in its sales pipeline. Morgan Keegan cut its estimates.
Best Buy (BBY) reported fourth-quarter EPS from continuing operations of $1.55, vs. $1.40 a year earlier, on 2.8% higher same-store sales. The electronics retailer sees EPS of 27 cents to 32 cents for the first quarter and $2.95-$3.10 for fiscal year 2006. The forecast includes expenses and was below some estimates.
Treasury yields ended a volatile session lower on Friday. In early trading, yields plunged following the sub-par payrolls gain, but then recovered. The 10-year yield fell to 4.40% before settling at 4.45%.
European stock markets were higher on Friday amid optimism about earnings. London's Financial Times-Stock Exchange 100 index was up 19.6 points, or 0.4%, to 4,914.
Germany's DAX index rose 24.76 points, or 0.57%, to 4,373.53. DaimlerChrysler said it will cut 700 jobs and eliminate models to stem losses.
In Paris, the CAC 40 index added 12.3 points, or 0.3%, to 4,080.8.
Asian markets finished mixed on Friday. In Japan, the Nikkei 225 index rose 54.68 points, or 0.47%, to 11,723.63. The Bank of Japan's quarterly Tankan survey showed the confidence index fell to 14 points in March from 22 in December and a 13-year high of 26 in September.
In Hong Kong, the Hang Seng index fell 25.53 points, or 0.19%, to 13,491.35.