Stocks closed solidly lower Friday, as a report showing slow job growth in May raised questions about the strength of the economy. Soaring oil prices and a report showing unexpectedly weak business activity in the service sector in May did not help sentiment, according to Standard & Poor's MarketScope.
On Friday, the Dow Jones industrial average fell 95.52 points, or 0.88%, to 10,460.97. The broader Standard & Poor's 500 index was down 8.27 points, or 0.69%, to 1,196.02. The tech-heavy Nasdaq composite index fell 26.37 points, or 1.26%, to 2,071.43.
Looking ahead to next week, investors will be paying careful attention to Federal Reserve Chairman Alan Greenspan's testimony to Congress on the state of the economy Thursday. The most closely watched economic report will be the figures on the international trade balance due to be released Friday. Economists polled by Action Economics are expecting the April deficit to come in at $58 billion, after the unexpectedly low March reading of $55 billion.
Also next week, reports will be released on April's consumer credit level Tuesday, April's wholesale trade on Wednesday, and weekly jobless claims Thursday.
Companies on next week's earnings calendar include Toys "R" Us (TOY) on Tuesday, H & R Block (HRB) on Wednesday, and National Semiconductor (NSM) Thursday.
In Friday's economic news, nonfarm payrolls increased by only 78,000 in May, the smallest boost in nearly two years. Analysts had been expecting an increase of 175,000, following the stronger than expected gain of 274,000 in April. The unemployment rate, however, fell to 5.1%, the lowest level since September, 2001.
Also out Friday, the Institute for Supply Management's service index came in lower than expected. The 58.5 May reading was down from 61.7 in April, and less than the 60 reading that analysts forecast.
In the energy markets, July crude oil futures settled up $1.40 to $55.10 on the New York Mercantile Exchange. Action Economics said the rally was led by concerns over distillate supplies, including gasoline and heating oil, which also finished higher.
In corporate news, L-3 Communications Holdings (LLL), maker of secure satellite and marine communications systems, said Friday that it had reached a deal to buy defense contractor Titan (TTN) for about $1.97 billion in cash. L-3 will pay $23.10 per share in cash, and also will assume about $680 million in debt as part of the agreement.
Apple Computer (AAPL) was down 5%, after the website appleinsider.com cited unnamed sources saying that the company was overstocked on most iPod models. Separately, late Thursday the company said it agreed to extend warranties and issue $50 credits to iPod users who had problems with batteries in older models of the digital music players, according to reports.
Pork producer Smithfield Foods (SFD) said Friday its fourth-quarter earnings dropped to $85.4 million, 30% lower than the period last year, which included proceeds from the sale of a pork processor.
Treasuries were trading lower, after jumping immediately following the release of the report showing weak job growth. Investors are uncertain about what the Federal Reserve will stick to its tightening cycle, and some are nervous about what Federal Reserve Board Chairman Alan Greenspan might say in Sunday speech, according to Standard & Poor's MarketScope. The 10-year yield was at 3.99%.
European stock markets closed lower Friday. London's FTSE 100 index dropped 5.60 points, or 0.11%, to 4,999.40, following the report that the British services purchasing managers index dropped to 55.1 from 56.5 in April, which was more than expected. Logistics outfit Exel was up after Merrill Lynch reinitiated coverage with a buy recommendation, while buyout firm 3i fell after UBS cut its recommendation to neutral from buy.
Germany's DAX index fell 21.78 points, or 0.48%, to 4,511.68, as Germany's May purchasing managers index rose to 52.6 from 51.3 in April. Chipmaker Infineon was up after JP Morgan lifted its growth estimate, while IWKA was higher after its CEO quit.
In Paris, the CAC 40 index, fell 21.25 points, or 0.51%, to 4,162.47, even though the French purchasing managers index rose to 59.0 from 57.7 in April.
Asian markets closed lower Thursday. In Japan, the Nikkei 225 index gained 20 points, or 0.18%, to 11,300.05. Notable movers included Millea Holdings, which lost 2.1% on a Merrill Lynch downgrade to neutral, and Sanyo Electronic, which fell 2.15% on concern over its new management team. As for gainers, Takeda Pharma climbed 1.71% after Deutsche Securities upgraded the shares to buy.
In Hong Kong, the Hang Seng index gained 3.87 points, or 0.03%, to 13,818.45 in cautious trading ahead of the release of the U.S. jobs data.