Stocks decline on economic slowdown concerns

September 03, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks declined yesterday amid concern that weaker-than-expected August job growth may signal an economic slowdown and diminished corporate earnings. A sagging dollar and bond market also converged to drive stocks lower.

The Labor Department said the economy added 179,000 jobs last month, far below what most economists had expected.

"If the numbers are as they appear, it doesn't bode well for the economy and profits," said Anthony Dwyer, chief investment strategist at Sherwood Securities Inc.

The Dow Jones industrial average declined 15.86, to 3,885.58, ending the week just 4.53 points higher. Losses in Caterpillar Inc. and International Business Machines Corp. offset gains in American Express Co. and Bethlehem Steel Corp.

The employment report came a day after the nation's retailers posted mixed August sales and computer stocks slumped on concern about slowing profit growth in the industry, a bellwether for the overall economy. The Dow industrials shed 11.98 Thursday.

The Standard & Poor's 500 index slumped 2.18, to 470.99, after rising 1.72 initially, paced by falling drug, utility and food shares.

The Nasdaq composite index rose 0.28, to 759.23, after rising as much as 2.25 earlier. The index was hurt by Nextel Communications Inc., which tumbled $2.75, to $22.50, after Thursday's announcement that talks aimed at salvaging MCI Communications Corp.'s plan to invest $1.3 billion in Nextel had collapsed.

Eleven stocks fell for every nine that rose on the New York Stock Exchange. Trading was sluggish because many people are away for the three-day weekend. Also, the bond market closed early in observance of Monday's Labor Day holiday.

Stocks rallied along with bonds immediately after the jobs report was released, amid expectations that weak job growth would give the Federal Reserve less impetus to raise interest rates.

Both markets later pared their gains as the notion that inflation is accelerating persisted. The yield on the Treasury's benchmark 30 1/4 -year bond fell as much as 10 basis points, to 7.35 percent, before climbing back to 7.49 percent as expectations lingered of another rate increase at the Nov. 15 Federal Reserve policy meeting.

The Dow industrials dropped for the third straight day since they closed at a 6 1/2 -month high of 3,917.30 Tuesday in the wake of the $10-billion merger agreement between Lockheed Corp. and Martin Marietta Corp.

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