US stocks declined after a government report showed the unemployment rate rose more than forecast in June, suggesting that any economic recovery may falter as consumers become more reluctant to spend.
"There is still weakness in the employment situation," said Michelle Clayman, chief investment officer at New Amsterdam Partners, which manages US$1.8 billion in New York. "We need to see more of the underlying economic numbers turning around for the market to have legs."
AT&T Corp dropped as Standard & Poor's lowered its credit rating on the biggest US long-distance telephone company.
The Standard & Poor's 500 Index lost 8.05, or 0.8 percent, to 985.70. The Dow Jones Industrial Average declined 72.63, or 0.8 percent, to 9070.21 and the NASDAQ Composite Index sank 15.27, or 0.9 percent, to 1663.46.
In the holiday-shortened week, the S&P 500 rose 1 percent for its fifth weekly gain in six. The Dow climbed 0.9 percent and the NASDAQ jumped 2.4 percent, its biggest advance in five weeks. US exchanges closed at 1pm on Thursday and remained closed Friday for Independence Day.
Interest rates
Stocks have rallied since March as some investors bet that the lowest interest rates in 45 years and a US$350 billion package of federal tax cuts will help drive economic growth. The S&P 500 surged 15 percent in the second quarter, reaching its highest in about a year on June 17.
AT&T dropped US$0.46 to US$19.42. Standard & Poor's cut the company's debt to the second-lowest investment grade because of increased competition and sluggish sales.
About three stocks fell for every two that rose on the New York Stock Exchange. More than 761 million shares changed hands, about half of the average for a full day in the past three months.
All 10 of the industry groups in the S&P 500 declined.
Technology shares, which have been the market's best performers this year, led the drop. Microsoft Corp, the world's biggest software maker, fell US$0.43 to US$26.45 and Intel Corp, the No. 1 semiconductor producer, lost US$0.48 to US$21.73. The S&P Information Technology Index is up 20 percent this year versus a 12 percent gain for the S&P 500.
Tech sector
"The market may have gotten ahead of itself, in particular the tech sector," said Clayman.
The US unemployment rate jumped to 6.4 percent, the highest since April 1994, from 6.1 percent in May. Economists had predicted 6.2 percent, the median forecast of 69 estimates from a Bloomberg News survey. The economy lost 30,000 jobs last month, the Labor Department said. Economists had forecast no change in June payrolls.
A weekly report on new claims for unemployment insurance also was worse than expected. The Labor Department said initial jobless claims rose last week to 430,000 from a revised 409,000.
Economists surveyed by Bloom-berg News had forecast 410,000 new claims.
The Institute for Supply Man-agement said its non-manufacturing index jumped to 60.6 in June, the highest since September 2000, from 54.5 a month earlier.
"Employment tends to be a lagging indicator," said Vladimir de Vassal, head of quantitative research at Glenmede Trust Co, which manages US$12 billion in Philadelphia. The service-industry report "provides greater assurance that the economy will be improving in the second half of 2003 and into next year," he said, and that means stocks will rise in the next year.
Leaders & losers
Adaptec Inc declined US$0.84 to US$7.60. The maker of circuit cards that speed up the connections between computers said sales in the quarter ended June 30 were US$107 million. It had previously forecast US$115 million to US$120 million.
Micrel Inc dropped US$0.86 to US$10.12. The maker of semiconductors for computers and communication gear said second-quarter revenue fell 3 percent to 4 percent from the previous quarter. It had forecast an increase of 3 percent to 5 percent.
Documentum Inc, which makes document-management software, plunged US$4.06 to US$15.69. The company said second-quarter revenue was US$68 million, below the US$72 million to US$73 million it expected.
Knight Trading Group Inc, the biggest market-maker of NASDAQ Stock Market securities, surged US$1.83 to US$8.50 after the company said second-quarter profit will be double its earlier forecast because trading picked up. The 27 percent surge was the stock's biggest in more than four years.
Ameritrade Holding Corp, the second-biggest shareholder in Knight after Merrill Lynch, rose US$0.46 to US$7.88.
Boston Scientific Corp, a medical-device maker, added US$0.53 to US$62.56. The company said it plans to hire 1,200 people and spend more to market a new heart stent that helped boost sales in the second quarter.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
RSS