Stocks waver, investors opt for Treasurys after disappointing jobs report from ADP

By Stephen Bernard, AP
Wednesday, October 6, 2010

Stocks mixed, Treasury yields drop after jobs data

NEW YORK — Stocks traded in a tight range Wednesday after a disappointing report on the jobs market renewed concern about the economy. Treasury yields sank to new lows as investors sought safety and anticipated more stimulus measures from the Federal Reserve.

Payroll company ADP said private employers cut jobs in September for the first time in seven months. Investors are seeing a silver lining in the news, however, hoping that it could help push the Federal Reserve to take more action to get the U.S. economy going next month, including stepping up its purchases of bonds.

Gold reach another high and the dollar slumped further against other currencies on anticipation that U.S. interest rates could head even lower if the Fed moves aggressively to buy bonds and take other measures to encourage borrowing.

The Dow Jones industrial average rose 22 points in midday trading, but broader indexes were mixed. The yield on the two-year Treasury note hit a record low 0.38 percent, and the yield on the 10-year note fell to 2.38 percent, its lowest level since January 2009 when the country was mired in a recession.

More weak economic data in the coming weeks, including any disappointment from Friday’s key Labor Department report on employment, could provide further incentive for Fed action.

The Dow rose 21.57, or 0.2 percent, to 10,966.06. The Standard & Poor’s 500 index rose 0.56, or 0.1 percent, to 1,161.31, while the Nasdaq composite index fell 11.32, or 0.5 percent, to 2,388.51.

Rising stocks narrowly outpaced those that fell on the New York Stock Exchange where volume came to 340.7 million shares.

In corporate news, Johnson & Johnson agreed to buy Dutch biotechnology company Crucell NV for about $2.41 billion. Johnson & Johnson first announced it was planning an offer last month. Johnson & Johnson shares dipped 20 cents to $62.60.

Costco Wholesale Corp.’s shares dipped after its quarterly revenue fell short of analysts’ expectations. They fell $1.12 to $63.54.

“Today’s numbers suggest (Friday’s report) probably won’t improve at all,” said Mark Luschini, chief market strategist at Janney Montgomery Scott.

Luschini said a bad jobs report from the government Friday would “increase odds the Fed is more forthcoming and aggressive” in trying to stimulate the economy.

Japan announced similar bond-buying measures Tuesday when it also cut a key interest rate to near zero percent. The U.S. central bank long ago set interest rates at near zero, leaving it few other options but to buy Treasurys to further drive interest rates lower. If the Fed continues to push interest rates down it could make investing in stocks and other kinds of riskier assets more appealing by comparison.

Private hiring has been slow to pick up as the economy remains sluggish. ADP said private employers cut 39,000 jobs last month.

The ADP report usually below comes in below the government’s measure of total private payrolls. So far this year, the average difference has been about 75,000. That means Friday’s report could show a net increase in private hiring. But the ADP figure does suggest that current forecasts for a gain of about 75,000 private sector jobs could be too high.

Uncertainty about costs from health care and financial regulatory reform as well as potential changes to taxes have been major reasons companies have shied away from adding new jobs.

Gold prices touched another record high as investors shied away from the dollar, whose value is hurt if the Fed buys more bonds. Gold rose as high as $1,351.00 an ounce early Wednesday before pulling back to $1,348.60 an ounce.

European indexes initially dipped after Ireland’s credit rating was slashed, but bounced back. Britain’s FTSE 100 rose 0.8 percent, Germany’s DAX index gained 0.9 percent, and France’s CAC-40 rose 0.9 percent.

Japan’s Nikkei stock average jumped 1.8 percent.

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