U.S. stocks closed mixed Friday as a late buying surge trimmed earlier losses that followed a report U.S. nonfarm payrolls fell 651,000 and the unemployment rate rose to 8.1% in February. The Dow Jones industrial average held at the 6500 level, though it fell 6% on the week. The S&P 500 index edged back from a 13-year low, but it logged a 7% loss for the week.
The employment report created speculation the economy might be near the bottom. But next week's February retail sales report is not likely to support that argument, says S&P MarketScope.
Apple (AAPL) led technology shares lower after an analyst downgrade of the stock.
On Friday, the 30-stock Dow Jones industrial average was higher by 32.50 points, or 0.49%, at 6,626.94. The broad S&P 500 index was up 0.83 points, or 0.12%, at 683.38. The tech-heavy Nasdaq composite index shed 5.74 points, or 0.44%, to 1,293.85. The Nasdaq was off 6% for the week.
On the New York Stock Exchange, 19 stocks were lower for every 11 that advanced. Nasdaq breadth was flat. Trading was active before the weekend.
The Standard & Poor's 500-stock index closed at its lowest level since September, 1996, on Thursday, and the Dow Jones industrial average posted its lowest close since April, 1997.
Year to date, the Dow and S&P are each down 24% and the Nasdaq is off by 18%.
Bonds were mixed Friday. Gold futures were up. The dollar index was off. Oil futures were up.
Exxon Mobil (XOM), Chevron (CVX), and McDonald's (MCD) were among the names leading the blue chips higher Friday.
The Wall Street Journal reports top General Motors (GM) executives are more open to a speedy bankruptcy reorganization financed by the government, pushing aside earlier concern that such a move would scare away so many customers the company wouldn't survive, said a person familiar with the matter. While the company still wants to avoid bankruptcy, the new view represents a reversal from GM's position late last year, when it sought a federal bailout. The change in thinking, combined with the disclosure Thursday that GM's auditor has raised "substantial doubt" about the car maker's ability to keep going, appears to move GM closer to the possibility it will file for reorganization.
Both developments come as President Barack Obama's auto task force is trying to decide how much more aid to provide GM. They also come as GM is locked in negotiations with its bondholders to trade debt for equity as a way to cut its cost of operations.
Philadelphia Fed President Charles Plosser said Friday that the different responses to AIG, Lehman Brothers, and Bear Stearns has contributed to the uncertainty and that the too-big-to-fail doctrine creates perverse incentives, while failure of institutions is inevitable in a dynamic financial system. Yet he also warned against inefficient caps on the size of such organizations, though he sees the need for better resolution mechanisms for nonbank failures, similar to the FDIC's oversight of commercial banks.
New York Fed President William Dudley said a "complete breakdown of trust across markets has been remarkable," in his prepared statement on financial market turmoil. He said the further deterioration in economic conditions are reinforcing the downward spiral in confidence. The reluctance of some banks to raise additional capital to hedge against further erosion in the economy has also exacerbated the crisis, noting that once capital preservation becomes paramount, deleveraging intensifies and counterparties grow more wary. And, Dudley believes the deleveraging process is "far from complete" and would not be surprised if hedge funds will have fallen by 50% or more when all is said and done.
Kansas City Fed President Hoenig said the U.S. is drifting into "piecemeal nationalization" of institutions without resolving the crisis, said the hawkish non-voter in a sharp criticism of current policies. He said the U.S. was slow to react to fundamental financial woes and act decisively on financial firms, though it has been quick to provide liquidity and capital without a clear plan. Hoenig warned that countries which have avoided allowing large institutions to fail have been slower to recover from their crisis, while ad hoc solutions have led to more concentrated financial markets and losses in the financial system won't just go away. The U.S. needs to create a "defined resolution program" for the too-big-to-fail institutions.
In economic news Friday, payroll employment fell another 651,000 in February, while the unemployment rate jumped to 8.1% from 7.6%. The drop in payrolls was in line with expectations, but the unemployment rate rose more, in part because of a rise in the labor force. About half of the drop in payrolls was in goods-producing industries, with construction down 104,000 and manufacturing 168,000. Average hourly earnings rose 3 cents (0.2%), while weekly hours were flat. The only increases were in education and health care and government.
"The report is as bleak as expected, and shows the economy is still dropping rapidly. We expect another 2 million job losses by fall," says S&P Economics.
The OECD said the outlook for the world's major industrialized and emerging economies weakened further in January with all BRIC countries now facing a "strong slowdown."
European Commission President Jose Manuel Barroso said the European Union is facing an unprecedented situation due to the economic crisis and it needs to work at different levels to restore credit flows.
The Nikkei business daily reported Japan's government is considering tripling to 3 trillion yen ($30.6 billion) a program of low-interest loans and cash injections it is offering to firms in need of help. However, China served glum markets a dose of optimism, saying its economy was recovering and promising more swift action to absorb the shock of the global financial crisis and deepening recession in rich nations.
Wells Fargo (WFC) cut its quarterly dividend to $0.05 per share from $0.34 per share. The company said the reduction will enable it to retain an additional $5 billion in equity each year.
JP Morgan reportedly cut its estimates on Apple (AAPL).
Goldman Sachs reportedly upgraded Macy's (M) to its Conviction Buy List from neutral.
H&R Block (HRB) posted $0.20 vs. $0.02 third-quarter EPS from continuing operations on an 11% revenue rise. This revenue increase reflects both growth in the number of tax returns prepared and higher net average tax preparation fees.
Burger King Holdings (BKC) announced a $200 million stock buyback.
BorgWarner (BWA) announced a temporary suspension of its quarterly dividend of $0.12 per share until global economic conditions improve.
Steinway Musical Instruments (LVB) posted $0.40 vs. $0.90 fourth-quarter EPS on a 22% sales decline. Wall Street was looking for $0.25 EPS. Steinway anticipates a slow start to 2009 as dealers continue to reduce inventory in response to lower store activity and a severe contraction of third-party inventory financing. The company believes the industry will consolidate in 2009 and 2010. It said piano sales to institutions have been "holding up well."