Dow off 26 on weak jobs growth report Treasury bonds up as oil prices fall

WALL STREET

July 03, 1993|By Bloomberg Business News

NEW YORK -- Weaker-than-expected job growth in June reinforced pessimism about the economy, sending stocks into a tailspin yesterday.

The Dow Jones industrial average closed down 26.57, at 3,483.97, just above its session low of 3,481.20, reached at midday.

Declines in companies that depend on a strong economy for earnings growth, such as Goodyear Tire & Rubber Co. and International Business Machines Corp., outweighed a gain in General Electric Co. Only two of the average's 30 components -- GE and Du Pont Co. -- advanced.

Stocks opened lower after the Labor Department said the nation's unemployment rate rose to 7 percent in June, from 6.9 percent in May, as job growth weakened and the recovery stalled. The economy added only 13,000 nonfarm jobs last month, the weakest showing since August, amid more layoffs in manufacturing and slower hiring in service industries. The figure fell far short of economists' expectations of a gain of 141,000 jobs.

Decliners routed advancers 9-to-6 among common stocks on the New York Stock Exchange.

The Dow industrials forfeited all of this week's gains in the wake of the employment report. The average closed the week 6.92 points below last Friday's close of 3,490.89.

Trading was slower as the ranks of traders and investors thinned before the three-day weekend. About 220 million shares changed hands on the Big Board, down from an average of 258 million this week. U.S. financial markets will be shut Monday in observance of Independence Day.

The market's fall yesterday came despite the fact that stocks frequently rise even when economic news is bad because bad economic figures tend to lift bonds on expectations that interest rates won't rise. The resulting decline in yields helps make equities attractive relative to fixed-income securities.

"Bonds aren't rallying on the jobs report, and I'm sure that's throwing a wet blanket over everything," said Philip Smyth, analyst at Birinyi Associates Inc.

Treasury bonds did recover late in an abbreviated session, to close up 1/4 , after oil prices fell on reports that Iraq might be closer to resuming oil exports. The drop in oil lifted bonds because it reinforced perceptions that inflation is abating. Crude broke below $18 a barrel yesterday for the first time since January 1992.

The yield on the benchmark 30-year bond dropped to 6.66 percent, from 6.68 percent Thursday. Meantime, the jobs report drove yields on short-term Treasury rates to a six-week low amid expectations the Federal Reserve won't raise interest rates. The two-year Treasury note closed up 3/32, at 100 12/32, to yield 3.92 percent, down from 3.97 percent Thursday, the lowest yield since May 13.

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