Jump in unemployment rate drives stocks lower Friday

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Posted 12:52PM on Friday, May 3, 2002

NEW YORK - A spike in unemployment to the highest level in nearly eight years gave investors Friday yet another reason to doubt the strength of the economy and sell stocks sharply lower. Tech issues fell for the third straight session, while blue chips pulled back following a three-session advance. Aside from this week's rally in the Dow industrials, investors have been selling stocks for weeks because companies, while releasing first-quarter earnings results, haven't been able to tell them what they want to hear: There are stronger profits ahead. At midday, the Dow was down 119.01, or 1.2 percent, to 9,972.86. The Dow rallied 272 points Tuesday through Thursday, claiming its first three-day winning streak since the period that ended March 12. The broader market also fell. The Nasdaq dropped 34.79, or 2.1 percent, to 1,610.03, having fallen 10 of the previous 12 sessions. The Standard & Poor's 500 index declined 13.60, or 1.3 percent, to 1,070.96. The tech sector has suffered the brunt of the selling, because it's expected to be the last to recover. Through Thursday's session, the Nasdaq composite index had plummeted 20 percent from its high close for the year -- 2,059.38 back on Jan. 4. The Dow had declined 5.1 percent from its yearly high close of 10,635.25 on March 19. That kind of fervent selling makes analysts hopeful that the market has found a bottom. Meanwhile, skittish investors worry that the market can always find another low. "I think we are in the capitulation stage now," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. Cardillo said he expects selling to slow next week as the market settles in at a lower trading range. Wall Street was disappointed by a weaker-than-expected unemployment report for April. The nation's jobless rate jumped to 6 percent in April from 5.7 percent in March. It is the highest level since August 1994 when unemployment was also at 6 percent. Oracle fell 51 cents to $8.04 after Goldman Sachs and SG Cowen reduced their earnings outlooks on the software maker. Other tech losers included Texas Instruments, down $1.84 at $27.95, and Dell Computer, which declined $1.23 at $24.19. Cisco, slated to release its earnings next week, stumbled 35 cents to $13.29. Blue chips were also lower as investors cashed in after the three-session rally. Wal-Mart fell $1.32 to $55.33, while Coca-Cola declined 98 cents to $56.66. Declining issues outnumbered advancers nearly 4 to 3 on the New York Stock Exchange. Volume came to 572.92 million shares, up from 581.43 million at the same point Thursday. The Russell 2000 index, the barometer of smaller company stocks, fell 3.39, or 0.7 percent, to 509.98. In afternoon trading in Europe, Germany's DAX index fell 1.8 percent, France's CAC-40 lost 1.5 percent, and Britain's FT-SE 100 rose 0.6 percent. Japan's financial markets were closed Friday for a national holiday. The markets will also close Monday for another national holiday and reopen Tuesday.