Sun, May 05, 2002 - Page 10 News List

US stocks decline as unemployment rises

BLOOMBERG , NEW YORK

US stocks slumped as the highest jobless rate since 1994 and slower-than-expected growth in service industries cast doubt on the strength of a rebound in profits. Microsoft Corp.and Intel Corp led the decline.

Eight of the Standard & Poor's 500 Index's 10 industry groups fell, driving the benchmark to a sixth losing week in seven. The NASDAQ Composite Index slid to its lowest in almost seven months.

"A lot of people thought we bottomed in revenues and earnings late last year or early this year, and now that is suspect," said Benjamin Pace, who helps manage US$24 billion at Deutsche Bank Private Banking.

The S&P 500 fell 11.13, or 1 percent, to 1,073.43. Technology stocks accounted for almost half the drop. The Dow Jones Industrial Average slid for the first day in four, shedding 85.24, or 0.8 percent, to 10,006.63, as International Business Machines Corp fell to its lowest in 18 months.

The NASDAQ dropped 31.79, or 1.9 percent, to 1,613.03.

For the week, the S&P 500 slipped 0.3 percent. It has lost 6.5 percent this year. The NASDAQ fell 3.1 percent, bringing its decline for the year to 17 percent. The Dow gained 1 percent, boosted by better-than-expected sales from General Motors Corp. It's off 0.2 percent this year.

Advancing and declining stocks were about even on the New York Stock Exchange, while six fell for every five that advanced on the Nasdaq Stock Market. Some 1.28 billion shares traded on the Big Board, 3.8 percent below the three-month daily average.

The worse-than-forecast economic data helped push down consumer stocks such as Wal-Mart Stores Inc and banks including Citigroup Inc. Gold stocks jumped as the price of the metal climbed to its highest level in two years as investors sought alternatives to declining stock prices.

The unemployment rate rose in April to 6 percent from 5.7 percent in March as 43,000 nonfarm jobs were created, according to the Labor Department. Analysts surveyed by Bloomberg News expected 55,000 nonfarm jobs and an unemployment rate of 5.8 percent.

Separately, an industry survey showed activity at retail, financial services, construction and other non-manufacturing companies rose at a slower pace in April than in March, signaling a weaker-than-forecast recovery from recession for the largest part of the economy.

"We're still in that Never-Never Land where people are concerned about whether the economic recovery is going to keep plugging along," said Gil Knight, manager of the US$155 million Ark Small-Cap Equity Portfolio, which has returned an average of 28 percent annually over five years.

Businesses may wait another six months before they start increasing capital spending, Knight said, and until then profits may be disappointing. He has been buying shares of oilfield equipment stocks such as Grant-Prideco Inc and Tube Corp.

Computer-related and telecommunications companies, the biggest losers this year on benchmark indexes, had the steepest declines on Friday.

Microsoft dropped US$1.65 to US$49.56, US$0.15 below its Sept. 21 low.

Computer-related companies including Micron Technology Inc and Dell Computer Corp told investors at a Merrill Lynch & Co. conference this week that demand for their products was stagnant.

Intel, the biggest chipmaker, slipped US$1.31 to US$26.56. IBM was the biggest drag on the Dow, falling US$2.08 to US$81.78, the lowest since December 2000.

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