By Donna Kardos Yesalavich
U.S. stocks dropped Friday, deepening their declines in
midmorning trading, after nonfarm payrolls declined for the first
time this year and U.S. factory orders had their biggest drop in 14
months.
The Dow Jones Industrial Average (DJI) slipped 49 points, or
0.5%, to 9,685.12.
Leading the measure lower, Walt Disney (DIS) dropped 1.8%.
Disney's drop came after the entertainment giant said it bought the
maker of the popular Tap Tap Revenge game for Apple's (AAPL) mobile
devices like the iPhone.
The Nasdaq Composite (RIXF) fell 0.4% to 2,092. The Standard
& Poor's 500-stock index (SPX) lost 0.5% to 1,022, led by
financial and consumer discretionary sectors.
The health-care sector led to the upside, boosted by a 0.3%
increase in Eli Lilly (LLY) after the drug-making giant said it
will buy closely held Alnara Pharmaceuticals, a company focused on
developing treatments for metabolic diseases. Meanwhile, the
consumer-discretionary fell as investors worried about how the drop
in nonfarm payrolls might weigh on consumer spending.
The government's monthly jobs data sent mixed messages on the
labor market. The jobless rate edged down to 9.5% in June from 9.7%
the previous month, better than the increase to 9.8% economists
were expected. However, the decline in the unemployment rate
appeared to be skewed because in June, the civilian labor force
participation rate fell by 0.3 percentage point to 64.7%.
Meanwhile, nonfarm payrolls fell by 125,000 last month, with
only 83,000 private-sector jobs added. Economists were expecting
payrolls to drop by a more modest 110,000 in June. Nevertheless,
the drop in nonfarm payrolls was smaller than many investors had
feared.
"The market had priced in a terrible number for today and didn't
really get it," said John Canally, economist for LPL Financial.
"The estimate for this report has been moving down steadily for the
last two weeks so there was not a lot of hope for the report to
begin with. From that perspective, it was sort of good news."
Still, he added that in the private sector, "we're adding jobs
but we have a long way to go to get back. The big concern is how
does this data point -- this 83,000 -- fit in with this double-dip
scenario people are pricing in?"
Other data released Friday showed U.S. factory orders declined
in May, posting the largest drop in 14 months as transportation
related orders tumbled. New orders for U.S. manufactured goods
dropped more than expected by 1.4% in May to $413.25 billion.
The dollar strengthened against the yen but was weaker against
the euro, which was recently trading around $1.259, up from $1.2519
late Thursday in New York. The U.S. Dollar Index (DXY), which
tracks the U.S. currency against a basket of six others, fell
0.5%.
Other safe-haven assets including Treasurys. The decline in
Treasurys pushed the yield on the 10-year note (UST10Y) up to
2.96%.
Meanwhile, crude-oil futures slipped below $73 a barrel.
In European markets, Germany's lower house of Parliament on
Friday approved a watered-down bill banning "naked" short-selling
of all stocks and euro currency derivatives not intended for
hedging against currency risks. The bill extends Germany's previous
move to ban naked short-selling of shares in 10 leading German
financial institutions and credit default swaps on euro-zone
government bonds from May 19.
The Australian government announced sweeping changes to its
planned new mining tax Friday, making major concessions to the
mining industry and clearing the way for an early election, hot on
the heels of the sudden installation of a new prime minister.
American depositary shares of BHP Billiton (BHP) edged up 0.4%,
while Rio Tinto (RTP) advanced 0.4% and Freeport-McMoran Copper
& Gold (FCX) climbed 1.3%.