A flurry of dire profit warnings and news that the U.S. unemployment rate had spiked to its highest level in 20 months helped bring the market down at midday Friday from Thursday’s bull run.
The Nasdaq Composite Index had plunged 63.36 to 1,721.64 at midday,and the Standard & Poor’s 500 stock index was down 30.28 at 1,121.16. The Dow Jones Industrial Average had also dropped 213.10 to 9,704.95.
Thursday, the Nasdaq leapt to its third-largest percentage gain ever, after computer maker Dell Computer (Nasdaq: DELL) announced that it will hold firm on its first-quarter projections, injecting the sluggish market with a dose of energy.
Friday’s U.S. Department of Labor report, however, which said that businesses slashed payrolls by the largest amount in almost a decade, reignited investor worries that the economy may be headed for recession.
The data comes a little more than two weeks after the Federal Reserve cut interest rates aggressively for the third time this year, in a bid to stave off a prolonged economic slowdown.
Jobless Rate Climbs
According to the Labor Department, businesses slashed 86,000 jobs in March, following a gain of 140,000 jobs in February. The reduction in payrolls was the first since August and largest since November 1991, when the economy was emerging from recession.
The unemployment rate climbed from the 4.2 percent seen in February to 4.3 percent in March, the highest level since July 1999. The report also found that 135.8 million people were employed in March, compared with 141.9 million the previous month.
Several economists said that the data may prompt the Fed to announce a rare inter-meeting interest rate cut as early as next week.
“I think this report will lead the Fed to be much more aggressive than we would have expected a month ago,” John Hancock Financial Services chief economist Bill Cheney said in a note Friday. “An inter-meeting cut seems far more likely now, and a cut at the May Federal Open Market Committee meeting seems all but certain.”
Until then, investors may have to digest a regular diet of shaky profits and corporate layoffs.
Agilent Technologies (NYSE: A) dropped US$2.99, or 9.8 percent, to $27.63 in Friday morning trading after the company said that orders from major customers had dropped “dramatically” in the last six weeks and warned that it will not meet its second-quarter estimates.
The Palo Alto, California-based network technical equipment maker also said that it will temporarily slash pay for its 48,000 employees worldwide by 10 percent in a bid to cut costs.
Bad News Day
Telecommunications equipment maker Tellabs (Nasdaq: TLAB) also plummeted $7.81, or 19.2 percent, to $32.88 after it reduced first-quarter earnings projections for the second time in a month.
Also jumping on the profit-warning bandwagon was Sycamore Networks (Nasdaq: SCMR), which plunged $1.75, or 19.3 percent, to $7.31 on news that the company’s third-quarter revenue and earnings will miss targets after a sudden drop in customer demand.
Intel (Nasdaq: INTC) was also down, $1.25 to $24.38, on news that European regulators are investigating the marketing practices of the world’s largest chipmaker.
The E-Commerce Times Index was down 3.1 percent at midday, with gains in Travelocity (Nasdaq: TVLV) and Barnesandnoble.com (Nasdaq: BNBN) offset by losses in Amazon (Nasdaq: AMZN) and Cyberian Outpost (Nasdaq: COOL).