Stocks mixed after unemployment rate stays high

October 7, 2011 - 11:40 AM
Wall Street

In this Oct. 4, 2011 photo, trader Jason Weisberg works on the floor of the New York Stock Exchang. Investors were cautious on Friday, Oct. 7, 2011, ahead of U.S. jobs figures, with stocks down slightly after enjoying a couple of bumper days on hopes of a Europe-wide plan to fix the banking sector.(AP Photo/Richard Drew)

A three-day rally faded on Wall Street Friday after a small pickup in hiring failed to bring down the unemployment rate.

The Dow Jones industrial average edged up after the report as larger companies beat the broader market. Broader indexes moved between small gains and losses.

U.S. employers added 103,000 jobs last month, about double what economists had expected, the Labor Department said early Friday. The government also said more jobs were added in July and August than previously reported.

The Dow Jones industrial average rose 4 points to 11,127 at 11:20 a.m. Eastern time. Pfizer Inc., Wal-Mart Stores Inc. and Home Depot Inc. led the Dow higher. Half of the Dow's 30 components fell.

Broader indicators were weaker. The S&P 500 fell 6 points, or 0.5 percent, to 1,159. The Nasdaq composite dropped 27, or 1.1 percent, to 2,480.

Traders bought companies that would be more likely to do well even in a slow economy. Of the S&P's 10 industry groups, only three rose: telecommunications, utilities and consumer staples, a category that includes Coca-Cola Co. and Procter & Gamble Co.

The gains in hiring weren't enough to lower the unemployment rate, which remained steady at 9.1 percent for the third straight month. Traders watch the employment report closely because it provides the first significant snapshot of the previous month's economic performance and clues to the broader outlook for the U.S. economy.

The report led traders to sell ultra-safe investments that earn small returns such as U.S. Treasurys, pushing yields higher. Minutes after the report came out, the yield on the 10-year Treasury note rose to 2.11 percent from 1.98 percent.

The monthly jobs report is one of the few pieces of data powerful enough to overshadow traders' fears about Europe's festering debt crisis. Markets gyrated this summer as concerns intensified about a default by Greece. Many analysts now believe a default is unavoidable, and question whether Europe can prevent it from causing financial markets to seize up.

Short-term traders have reacted strongly to minor European developments, rumors and speculation. The Dow has closed up or down more than 100 points for nine straight trading days, the longest such streak since November 2008, in the middle of the financial crisis. The Dow soared 468 points, or 4.4 percent, Tuesday through Thursday.

Sprint Nextel Inc. leaped 6 percent, the most in the S&P 500, after the company told investors it will switch customers over to its own high-speed data network by the end of next year.

Bank of America Corp. plunged 4 percent, the most in the Dow, after weeks of sharp movements caused by concerns about legal costs the bank faces over shoddy mortgages that it sold.

J.P. Morgan Chase & Co. lost 2.7 percent. Financial stocks have been extremely volatile because of fears that Europe's problems could spill over in the U.S. banking industry.