Strong growth in the service sector and record-high oil prices sent stocks sharply lower yesterday on renewed inflation fears. A weaker-than-expected job-creation report...
NEW YORK — Strong growth in the service sector and record-high oil prices sent stocks sharply lower yesterday on renewed inflation fears. A weaker-than-expected job-creation report, which initially gave investors hope that economic growth would remain manageable, was ultimately ignored, and stocks finished mostly lower for the fourth straight week.
The Dow Jones industrial average fell 99.46 to 10,404.30 yesterday.
Microsoft, one of the 30 Dow stocks, slipped 5 cents to close at $24.12 yesterday, off 0.7 percent for the week. Boeing, also a Dow stock, gained 32 cents to $58.78, up 3.5 percent for the week.
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Broader stock indicators also retreated. The Standard & Poor’s 500 index slipped 7.67 to 1,172.92, while the Nasdaq composite index dropped 14.42 to 1,984.81.
For the week, the Dow lost 0.37 percent and the Nasdaq fell 0.31 percent. The S&P 500 posted its first gain in the past four weeks, rising 0.13 percent.
The early release of the Institute for Supply Management’s (ISM) service-sector index, which wasn’t due until Tuesday, showed greater-than-expected growth in non-manufacturing businesses — and a sharp jump in consumer prices. That worried skittish investors that inflation might yet take hold and prompt the Federal Reserve to push for potentially jarring interest-rate increases.
The announcement stole momentum from the Labor Department’s jobs report, usually the most important piece of economic data every month. Only 110,000 jobs were created last month — half of what economists had expected. February’s figure also was revised lower by 19,000 jobs. The nation’s unemployment rate fell to 5.2 percent from 5.4 percent in February.
“We rallied nicely on the jobs report, but then we got a conflicting message from the ISM report. That report doesn’t usually carry as much weight, but it hit the bond market hard, and that moved to stocks pretty quickly,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “In a market where we’re really this nervous to begin with, it only takes a little bit to turn things around.”
Continuing fears of inflation, prompted by higher oil prices and a growing economy, plagued the markets during the week, as they have done for most of March, despite a strong session Wednesday.
A sharp jump in oil prices also sapped investors’ confidence. After reaching an intraday record of $57.70, a barrel of light crude settled at a closing record of $57.27, up $1.87, on the New York Mercantile Exchange.
“The 800-pound gorilla in the middle of the room is the lift in oil prices,” said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara, Calif. “As prices go up in oil and energy, it’s a direct tax on the economy without any corresponding benefit, with the exception of the earnings of energy companies.”
The ISM services index — mistakenly released alongside ISM’s manufacturing report — came in at 63.1 for March, far more than the 59 reading expected on Wall Street and sharply higher than February’s 59.8 reading.
With the service sector such a strong part of the economy, and another part of the report saying that service providers are charging higher prices, investors feared the growth could trigger inflation.