Stocks finished lower Friday despite a stronger-than-expected update on the health of the U.S. labor market. The constant weight of negative third-quarter earnings preannouncements continued to pound stocks. Both the Dow and Nasdaq hit fresh bear-market lows as investors remain cautious and question the timing of a corporate profit turnaround.
The Dow Jones industrial average fell 188.80 points, or 2.45%, to 7,528.40. An earnings warning from storage giant EMC (EMC) helped drag the tech-heavy Nasdaq composite index down 25.66 points, or 2.2%, to 1,139.90.
And the broader Standard & Poor's 500-stock index lost 18.37 points, or 2.24%, to 800.58, inches away from the July 23 closing low of 797.70.
The economic data calendar is light until the end of next week. Among the highlights, consumer credit will be reported on Monday, followed by the latest on export and import prices and wholesale inventories on Thursday. The key reports to watch on Friday will be the producer price index -- a measure of inflation at the wholesale level -- September retail sales, and the University of Michigan's consumer sentiment survey.
The market will also get plenty of earnings news as reporting season gets underway. Companies scheduled to release quarterly results include: PepsiCo (PEP) on Tuesday; Abbott Labs (ABT) and Yahoo! (YHOO) on Wednesday; Dow Jones (DJ) and First Data (FDC) on Thursday; and General Electric (GE) on Friday.
Friday's employment report lifted the major averages at the start of trading, but sellers quickly dominated. While the Labor Department reported that nonfarm payrolls fell 43,000 in September, vs. estimates for a 20,000 gain, the August number was revised sharply higher to 107,000 from 39,000. Also, the unemployment rate fell to 5.6%, stronger than the 5.9% forecast, from 5.7% in August. The report reduces the chance of an interest rate cut later this year, says economic research outfit MMS International.
In earnings news, Dow member Alcoa (AA) reported a 43% decline in third-quarter profits on lower aluminum prices and scaled-back production.
Also pressuring the Dow was aircraft maker Boeing (BA), after it warned that third-quarter earnings will be reduced due to pre-tax and non-cash charges of about $250 million to write down aircraft leased to money-losing airlines. The charges will slash 20 cents from after-tax EPS.
And Philip Morris (MO) shares fell after a Los Angeles jury ordered the tobacco maker to pay $28 billion in punitive damages to a woman with lung cancer.
Schering-Plough (SGP) was down sharply after the pharmaceuticals maker cut its earnings per share guidance for 2002 and 2003 because of an expected loss of Claritin prescription sales in the U.S.
In technology, EMC was lower on a weak third-quarter forecast. The storage systems maker sees a loss per share of 2 cents on revenue of about $1.25 billion in the quarter, and predicts that it may not reach profitability for the second half of the year.
Treasuries rounded out the week on solid footing after a volatile ride on Friday following the key payrolls report. Though the data was firmer than expected, leveraged fund activity and event risk formed a potent bullish trend, says MMS.
European markets declined. In London, the Financial Times-Stock Exchange 100 index fell 81.20 points, or 2.09%, to 3,799.10, led down by pharmaceutical stocks GlaxoSmithKline and AstraZeneca on the heels of Schering-Plough's negative forecast.
In France, the CAC 40 lost 95.14 points, or 3.3%, to 2,765.90. And in Germany, the DAX Index declined 98.68 points, or 3.5%, to 2,714.62, led by bank stocks.
Asian markets finished higher. The Nikkei gained 91.12 points, or 1.02%, to 9,027.55, after falling below the 9,000 mark on Thursday. Japan's major stock indices bounced back from a four-straight day fall on Friday, on bargain-hunting. A rally in telecom stocks counteracted a continued decline in bank shares.
In Hong Kong, the market was up 67.05 points, or 0.75%, to 9,051.37.