Unemployment jump
drives stocks lower

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By Amy Baldwin
Associated Press

NEW YORK >> A spike in unemployment to the highest level in nearly eight years gave investors yet another reason today to doubt the strength of the economy and sell stocks sharply lower. Tech issues fell for the third straight session, while blue chips pulled back following a three-session advance.

Today's decline only worsened a slump that has dragged the Dow Jones industrials down 5.9 percent from their 2002 closing high of 10,635.25, reached March 19, while the Nasdaq composite index has suffered a much steeper slide, falling 21.7 percent from its high close for the year -- 2,059.38 back on Jan. 4.

"We are in a bear market, particularly in the Nasdaq area of the market. The excesses we built up over many years is being taken out of the market. Just like it went to extreme levels on the upside, it is going to extreme levels on the downside," said Mark Minervini, portfolio manager of First Mark Fund and president of Quantech Research Group.

The Dow closed down 85.24 to 10,006.63. The Dow had rallied 272 points Tuesday through yesterday, claiming its first three-day winning streak since the period that ended March 12.

The broader market also fell. The Nasdaq dropped 31.79 to 1,613.03, having now fallen 11 of the past 13 sessions. The Standard & Poor's 500 index declined 11.13 to 1,073.43.

Advancers edged decliners on the New York Stock Exchange, with 1,644 up, 1,505 down and 217 unchanged. Volume was moderate at 1.28 billion shares.

The NYSE composite index fell 3.86 to 577.79, the American Stock Exchange composite index rose 9.66 to 959.58 and the Russell 2000 index, the barometer of smaller company stocks, fell 1.05, or 0.2 percent, to 512.32.

The Treasury's 2-year note rose 18 to 100 1432; its yield fell 7 basis points to 3.15 percent. The 10-year note gained 1/4 to 98 1832; its yield lost 3 basis points to 5.06 percent. The 30-year bond jumped 22/32 to 97 21/32; its yield lost 5 basis points to 5.54 percent.

Wall Street was disappointed by a weaker-than-expected unemployment report for April. The nation's jobless rate jumped to 6 percent in April from 5.7 percent in March. It is the highest level since August 1994, when unemployment was also at 6 percent.

Tech companies fell on a variety of indications that their business slump lingers. For example, a Merrill Lynch note to investors said, "visibility is still lousy for most semiconductor companies, and, will continue to be through the second quarter." Losers among chip makers included Texas Instruments, down $1.49 at $28.30, and Intel, which fell $1.25 to $26.60.

Oracle slipped 12 cents to $8.43 after Goldman Sachs and SG Cowen reduced their outlooks on the software maker.

Uncertain about earnings due next week from Cisco, investors bid the networker down 50 cents to $13.14.

The tech sector has suffered the brunt of selling because it's expected to be the last to recover from the recession. Another factor in the tech selloff has been the fact that investors ran those stocks up the most in the latest bull market when companies including Cisco were trading at 100 times their earnings.

The market's overall relentless selling makes analysts hopeful that stocks have found a bottom. But many investors worry that the market can always find another low.

"I think we are in the capitulation stage now," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. Cardillo said he expects selling to slow next week as the market settles in at a lower trading range.

Blue chips fell as investors cashed in profits after the three-session rally. Wal-Mart fell $1.40 to $55.25, Coca-Cola declined 78 cents to $56.86, and General Motors stumbled 56 cents to $65.68.