Stocks Fall, Worry About Economy Slowing

Fri Jul 2, 2004
By Megan Davies

NEW YORK (Reuters) - Stocks fell on Friday after a sharp slump in the pace of U.S. job hiring last month caused worries about the economy dragging down industrial stocks.

Apple Computer Inc. (AAPL.O: Quote, Profile, Research) fell after the computer maker said it would delay the introduction of its next iMac computer, a stumble that comes at the crucial back-to-school sales season. Its shares tumbled nearly 5 percent.

Chip maker Intel Corp (INTC.O: Quote, Profile, Research) also dragged on the market, falling nearly 2 percent.

Labor Department data showed the pace of U.S. hiring slumped sharply in June after several months of robust gains, as employers added fewer than half the number of payroll jobs forecast and hours of work shrunk.

The department said only 112,000 jobs were created last month, far fewer than the 250,000 that Wall Street analysts had anticipated.

The Dow Jones industrial average was down 35.99 points, or 0.35 percent, at 10,298.17. The Standard & Poor's 500 Index was down 1.65 points, or 0.15 percent, at 1,127.29. The technology-laced Nasdaq Composite Index was down 9.11 points, or 0.45 percent, at 2,006.44.

Scott Lynch, managing director of U.S. trading at CSFB, said fears of a slower economy were hitting cyclical stocks, such as industrial companies, which tend to fall when the economy is doing poorly.

"The numbers this morning weren't as robust as people thought and that's spilling over into the cyclicals," he said.

"Any cyclical names are down - chemicals, aluminum, heavy machinery - it's right across the board."

Investors are worried that if the economy slows, companies' profits will be hit as they generate less business.

Heavy equipment maker Caterpillar Inc (CAT.N: Quote, Profile, Research) fell $1.47 to $76.71, aerospace company United Technologies (UTX.N: Quote, Profile, Research) was $1.02 lower at $89.68 and diversified manufacturer 3M Co (MMM.N: Quote, Profile, Research) slipped 27 cents to $87.90.

But the job numbers boosted housing stocks as investors hoped for a slow rise in interest rates.

Homebuilder and mortgage company Centex Corp (CTX.N: Quote, Profile, Research) was up $1.39 to $46.64, Los Angeles-based homebuilder KB Home (KBH.N: Quote, Profile, Research) rose $1.84 to $69.64 and Michigan-based homebuilder Pulte Homes Inc (PHM.N: Quote, Profile, Research) gained $1.54 to $53.28.

On the way down, shares of Apple fell $1.54 to $30.76.

Intel was lower, down 55 cents to $26.47, after a report indicated that sales of microprocessors, the central chip in personal computers, were relatively weak in May.

Caremark Rx Inc. (CMX.N: Quote, Profile, Research) also weighed on the market. Shares fell more than 5 percent, down $1.75 at $30.45, after the provider of pharmacy benefit services said the attorney general of Washington state was seeking information from the company related to its business practices.

And shares of New York Community Bancorp Inc. (NYB.N: Quote, Profile, Research) , the largest savings and loan based in New York state, fell 68 cents to $18.55 after it announced a balance sheet restructuring on Thursday.

(Additional reporting by Ilaina Jonas)

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