Stocks ended lower Friday after Wall Street interpreted a stronger-than-expected U.S. July job market report as a sign of less aggressive interest-rate easing by the Federal Reserve. The employment numbers gave traders an excuse to pocket profits ahead of the weekend on gains accumulated during the week.
Meanwhile, concerns about when corporate earnings will turn the corner persisted. On Tuesday, Aug. 7, Internet equipment maker and tech bellwether Cisco Systems Inc. (CSCO ) is scheduled to report numbers for the fourth quarter and 2001 fiscal year.
In economic news, the Labor Department said the U.S. unemployment rate held steady at 4.5% in July as fewer jobs were lost than feared, while job performance numbers for May and June were revised upward. The data, however, still suggested the overall economy remains soft.
Alan Ackerman, senior vice president and market strategist at Fahnestock & Co., said the expectation now has shifted to a 25-basis-point cut by Fed policymakers at their Aug. 21 meeting. Ackerman added the rally earlier in the week predominantly was fired by positive chip sector news, not overall economic strength.
Among stocks in the news Friday, conglomerate Tyco International Ltd. (TYC ) said it would buy anti-theft equipment maker Sensormatic Electronics Corp. (SRM ) in a stock swap valued at about $2.2 billion, expanding Tyco's portfolio of electronic security equipment.
The Dow Jones Industrial Average ended down 38.40 points, or 0.36%, to 10,512.78. The tech-heavy Nasdaq lost 21.13 points, or 1.01%, to 2,066.25. The broader S&P 500 Index was down 6.40 points, or 0.52%, to 1,214.35.
U.S. Treasuries ended lower. In economic news, the Labor Department said the July unemployment rate was 4.5%, matching June's level but up from 4.4% in May. Another 42,000 jobs were shed in July on top of 93,000 lost in June, while 41,000 were created in May. The July figures beat Wall Street economists' forecasts that 50,000 jobs would be cut and that the unemployment rate would rise to 4.6%. Previously, the government said that only 8,000 jobs were created in May and that a steeper 114,000 were lost in June.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index lost 36.90 points, or 0.66%, to 5,547.60. In France, the CAC 40 was down 57.41 points, or 1.13%, to 5,031.29. And in Germany, the DAX Index shed 41.40 points, or 0.72%, to 5,735.88.
In Asia, markets ended with losses. Japan's Nikkei 225 index gave up early gains to close lower by 157.23 points, or 1.27%, to 12,241.97 as profit-takers sent shares lower in the afternoon. Transportation was the worst performing sector, following speculation by analysts that demand may flatten or decline in the second half of the year. Banks were hit hard by news of poor earnings, and a tepid response to plans aimed at hastening bad loan write-offs and restructuring. In Hong Kong, the Hang Seng index lost 197.29 points, or 1.58%, to 12,269.08.
By Heesun Wee in New York