Stocks closed sharply lower in active trading Friday as hopes for an interest rate cut sparked by weak job figures evaporated as the session wore on.
The Dow Jones industrial average, which lost 2.23 Thursday, fell 27. 72 to close at 2896.78.Among broader market gauges, the New York Stock Exchange composite index lost 2.07 to 205.66 and the Standard & Poor's 500-stock index tumbled 4.41 to 375.36. Both posted record highs Thursday. The price of an average share fell 35 cents.
Declines led advances 936-597 among the 2,042 issues crossing the NYSE tape. Big Board volume totaled 187,410,000 shares, down from 199,150,000 traded Thursday.
Prices opened higher, expected to surge after a much weaker-than-expected set of March employment statistics.
The nation's civilian unemployment rate soared 0.3 percentage point to 6.8 percent in March, the highest since 6.9 percent in November 1986.
Economists had expected a jobless rate of 6.7 percent and the loss of 167,000 jobs in March. The data at first renewed hopes that the Federal Reserve would pump up the economy with an interest rate cut.
But the advance soon fizzled, especially when the Fed failed to signal around midday that it was acting to lower short-term rates. At that point, traders saw the data only as yet another sign of a weak economy.
"The market likes instant gratification, and it didn't get it today, " said Hugh Johnson, chief economist at First Albany Corp. in Albany, N.Y.
"The knee-jerk, trader reaction was that the good news would motivate the Fed to lower short-term rates," he said. "But that was replaced by a more sober and troubling assessment. The market needs a recovery in the economy and earnings to justify the current level of prices. The employment numbers gave little evidence that the economy is or will recover anytime soon."
That, said Johnson, is making traders nervous that the rally since the beginning of the year has been a "false start. It wouldn't take much for investors with big profits to pull the trigger and begin a slide in stocks."
When the Fed failed to add funds to the banking system with the federal funds rate at 53/4 percent, Johnson said that was evidence that the Fed was not going to respond to the data, at least not that day. "So we had an economy not recovering and no sign that the Fed was helping. That was a big one-two punch," he said.
On the trading floor, Pepsico was the most active issue, down 7/8 to 331/4. It endorsed estimates for first-quarter earnings of nearly 26 cents a share vs. 23 cents a year ago.
Saatchi & Saatchi followed, off 1/4 to 11/2. Blockbuster Entertainment was third, up 3/4 to 121/8.
Among the blue chips, AT&T fell 1/2 to 34. It once again rejected the $110 a share NCR demanded for an acquisition. NCR lost 7/8 to 967/8. IBM fell 7/8 to 1125/8, Philip Morris lost 7/8 to 673/4 and General Motors slid 5/8 to 371/4. A Lehman Bros. analyst lowered earnings estimates.
Elsewhere, CBS rose 33/4 to 1691/2. It reported weak first quarter earnings and announced 400 layoffs. Bank of Boston slumped 13/8 to 91/4. It announced financing plans for a bid for Bank of New England.
On the over-the-counter market, Agouron Pharmaceuticals soared 83/4 to 19. It has developed a map of the protein structure of the AIDS virus, which may help scientists create new drugs for the disease. And First Executive fell 3/16 to 1/4. New York State ordered one of its units to stop writing new policies and boost its reserves by $125 million.