Jobless Figures Put Dent on Market : Market Overview

The stock market wound up a zigzag session showing a small loss with the market disappointed that despite poor jobless figures for May, no interest cut appears on the horizon.

The Dow Jones average of 30 industrials, down about 25 points at its mid-session low, finished with a 1.04 loss at 3,398.69.

A surprisingly large rise in unemployment in May sent bond prices higher. The Treasury’s bellwether 30-year bond yield, which moves inversely to its price, fell to 7.84% from 7.87% late Thursday.

Stocks

The Labor Department reported that the civilian unemployment rate jumped to 7.5% in May from 7.2% the month before, reaching its highest level in almost eight years.

In figures that are more closely watched on Wall Street, the department said non-farm payroll employment increased by a smaller-than-expected 68,000 last month.

Analysts said the figures unsettled traders, who had been growing increasingly confident that a recovery from the recession was gathering momentum.

Many economists had expected the jobless rate to hold steady. But the number of people looking for work shot up by 330,000. This big increase was the main factor in the jump in the number of unemployed to 9.5 million.

“It could be read as a blatant sign of weakness,” said Michael Moran, chief economist at Daiwa Securities Inc. “There was some thought it might stimulate another easing in monetary policy.”

At the same time, however, the news helped push interest rates lower in the credit markets, seemingly enhancing the chances that the Federal Reserve might deem it necessary to ease credit conditions further.

For the week, the Dow average eked out a net gain of 1.81 points.

In the broader market, declining issues outnumbered advances by about 11 to 10 in the daily tally on the New York Stock Exchange.

Big Board volume was down to 201.35 million shares from 204.46 million the day before.

Among the market highlights:

* Reebok International tumbled 2 1/2 to 23 1/2 in active trading. Late Thursday, the athletic footwear company projected lower earnings for the second quarter, citing increased marketing expenses.

* Walt Disney, also among the volume leaders, fell 3/4 to 36 1/2. Euro Disney said Thursday that it cannot be certain of making a profit in the fiscal year that ends in September, even though its new theme park in France is now open.

* Other losers among the blue chips included Philip Morris, down 1 1/8 to 74 3/8; Merck, down 1/2 to 49 3/8; American Express, down 3/8 to 23 5/8; Procter & Gamble, down 2 3/8 to 100 5/8, and Exxon, down 1/4 to 62 3/4.

* On the plus side, American President Cos. gained 2 1/2 to 46 3/8. The company said it would pay $44 apiece for all the approximately 923,000 shares tendered to it under an offer that expired at midnight Thursday, and would buy back another 1,077,000 shares.

* InterTan tumbled 4 7/8 to 15 1/2. The company announced a restructuring plan involving the closing of about 200 stores, which it said would result in a larger loss than earlier expected for its fiscal fourth quarter ending June 30.

* Bed Bath & Beyond, one of the most active issues in the NASDAQ over-the-counter market, traded at 17 after the specialty retailer had an initial public offering at that price.

* Xoma Corp. dropped 1/2 to 14 3/4 in NASDAQ trading on top of a 4 3/4 loss Thursday, when the company reported that the Food and Drug Administration said additional tests may be needed on Xoma’s E5 antibody.

Stocks closed lower in overseas trading. In Tokyo, the 225-share Nikkei average fell 174.03 points to 17,790.04, for a loss of 557.71 points on the week. London’s Financial Times 100-share average closed 13.4 points lower at 2,668.5, dropping 39.1 points over the week. Frankfurt’s blue chip DAX average ended the week at 1,789.07, off 3.24 points to 1,789.07, marking a weekly loss of 14.15 points.

Credit

The long bonds price rose 3/8 point, or $3.75 per $1,000 in face amount.

The bad employment news heightened market hopes that the Fed would again cut interest rates to spur an economic recovery. Lower interest rates increase bond prices.

Bond prices fell from their highs of the day, when the long bond was up more than 5/8 point, in the late afternoon as traders altered their portfolios before the weekend.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3.50%, down from 3.688% late Thursday.

Commodities

Crude and refined oil prices advanced and hit new highs for the year again in moderate trading.

On other markets, soybean futures prices plunged; platinum and silver futures retreated while gold advanced, and livestock futures were mostly lower.

Light, sweet crude oil for delivery in July, which rose 5 cents on Thursday, added another 14 cents to settle at $22.62 per barrel on the New York Mercantile Exchange, a new high for 1992. The near-term contract recorded yearly highs on both Wednesday and Thursday.

“This is a continuation of the strong psychological input the Saudis gave the market less than two weeks ago,” said Thomas Blakeslee, an analyst with Pegasus Econometric Group Inc. in Hoboken, N.J., referring to indications that Saudi Arabia is interested in higher prices, an about-face for the world’s biggest petroleum exporter.

Elsewhere, platinum futures were hit by a round of profit taking and the unexpectedly weak employment report.

Platinum’s industrial uses make it particularly susceptible to economic news.

The July delivery of the metal declined $4.70 to $368.30 an ounce on the New York Mercantile Exchange.

On the Commodity Exchange in New York, silver, also an important industrial metal, lost 2.5 cents in the July contract, which settled at $4.058 an ounce. The June gold delivery was 10 cents higher at $338.70 an ounce.

Currency

The dollar finished mostly lower on world currency markets after the release of the unemployment report.

Heavy morning trading reflected the bad economic news, said Renato Strauss, a foreign exchange dealer with Bank Julius Baer & Co.

“The dollar reflected the market’s belief that because of the poor unemployment data, U.S. interest rates might go south,” said Lloyd Atkinson, chief economist for the Bank of Montreal.

Lower rates tend to scare the dollar market because they would make dollar-denominated securities less valuable to investors, thereby decreasing need for the U.S. currency.

The dollar fell to 126.65 Japanese yen in New York from 127.40 yen late Thursday.

The dollar also fell to 1.590 German marks, from Thursday’s 1.598 marks.

The British pound rose to $1.834, against $1.827 the day before.