Wall Street drops 1pc after weak payroll report

Sentiment is tense on the floor at the New York Stock Exchange. — Reuters picSentiment is tense on the floor at the New York Stock Exchange. — Reuters picNEW YORK, April 5 — US stocks dropped more than 1 per cent today in the wake of payrolls data that was much weaker than expected, the latest in a series of reports to indicate economic growth may be losing momentum.

About 88,000 jobs were added in March, less than half the forecast of 200,000, though the unemployment rate dipped to 7.6 per cent from 7.7 per cent. The report follows similarly disappointing reads on the manufacturing and services sector, as well as other poor labour market data.

The data “adds concerns about fundamentals to concerns we had about prices having gotten ahead of themselves, which creates the potential for even further declines”, said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio.

The benchmark S&P has shed 1.8 per cent this week, by far its worst weekly decline of 2013.

The Dow Jones industrial average was down 140.64 points, or 0.96 per cent, at 14,465.47. The Standard & Poor’s 500 Index was down 17.41 points, or 1.12 per cent, at 1,542.57. The Nasdaq Composite Index was down 47.49 points, or 1.47 per cent, at 3,177.49.

Losses were broad, with more than 80 per cent of stocks on the New York Stock Exchange and Nasdaq trading in negative territory.

F5 Networks Inc was the S&P’s biggest percentage loser, dropping 17 per cent to US$74.65, a day after forecasting second-quarter earnings and revenue that were well below expectations.

Several of F5’s peers were also sharply lower, with Juniper Networks off 6.3 per cent at US$19.96 and Citrix Systems down 3.7 per cent at US$67.11.

Only four S&P 500 components rose more than 1 per cent, with Newmont Mining adding 2.3 per cent to US$40.03, alongside a rise in gold prices.

Retailers weakened, with the SPDR S&P Retail exchange-traded fund down 1.4 per cent at US$69.19.

If the S&P closes down on the week, it will be only the third weekly loss this year for the index, which has struggled to surpass an intraday record high of 1,576.09. The index has gained about 8.2 per cent this year without a significant pullback, leading many analysts to call for one.

Equity market gains have been partially fuelled by a bond-buying programme by the Federal Reserve. Measures from central banks around the world have also helped, and yesterday, Wall Street rose after the Bank of Japan announced aggressive policies to jump-start its economy.

Today’s payroll report “should reinforce the Fed’s recent bond buying activity; but that may not be enough to turn today’s bearish feelings in the markets”, said Todd Schoenberger, managing partner at LandColt Capital in New York.

Energy shares were pressured, as the group is closely tied to economic growth expectations. Crude oil fell for a third straight day, dropping 0.6 per cent and extending its decline for the week to more than 5 per cent. Chevron Corp fell 0.8 per cent to US$117.09.

Overseas, European shares slumped 1.7 per cent, falling to a one-month low on concerns over growth.

Earnings forecasts have been scaled back heading into first-quarter reports, due to be kicked off next week by Alcoa. S&P 500 earnings are expected to have risen just 1.6 per cent from a year ago, according to Thomson Reuters data, down from 4.3 per cent forecast in January.

Geopolitical tensions will remain in focus after North Korea placed two of its intermediate range missiles on mobile launchers and hid them on the east coast of the country, South Korean media reported today. — Reuters


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