Harsh Week for Stocks Ends With Mild Gains

The nation's unemployment rate bolted to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs. Both figures were worse than analysts expected. Video by AP
By Renae Merle
Washington Post Staff Writer
Saturday, March 7, 2009

Wall Street fought its way to modest gains yesterday after reports that the country's unemployment rate hit the highest level in 25 years, but stocks failed to move from this week's 12-year lows.

Despite brief rallies during the week, investors remain convinced they have not seen the worst of the economic crisis and are keeping their money on the sidelines, analysts said. Financial stocks took double-digit losses this week as traders questioned the health of the nation's largest banks.

After a volatile day of trading, the Dow Jones industrial average was up 0.49 percent, or 32.50 points, to close at 6626.94. The Standard & Poor's 500-stock index inched up 0.12 percent, or 0.83 points, to 683.38. It closed below 700 this week for the first time since 1996. But the Nasdaq lagged behind yesterday, closing down 0.44 percent, or 6 points, at 1293.85.

That tech-heavy index was weighed down by a J.P. Morgan Chase report cutting its forecast for earnings and revenue at Apple, which tumbled 4 percent yesterday, to $85.30 a share.

"In prior recessions, the consumer had been fairly resilient, but mounting job losses, shrinking home values and tight credit stand to make the current recession quite more challenging," said the report from Mark Moskowitz, the J.P. Morgan analyst. "We believe that the next few quarters stand to get bumpy."

General Motors took the biggest hit among Dow stocks yesterday, falling 22 percent, to $1.45. The company's auditor warned Thursday that the automaker may not be able to continue on its own without more federal help.

The Dow and Nasdaq were both down 6 percent for the week. The S&P 500 tumbled 7 percent. It was the market's fourth weekly loss in a row. Stocks are likely to continue to struggle until an economic rebound looks more likely, analysts said.

That was reinforced yesterday by a Labor Department report showing that the jobless rate rose from 7.6 percent in January to 8.1 percent in February and that employers shed 651,000 jobs last month.

The unemployment rate was worse than analysts expected, but better than their worst fears, sending stocks surging at the opening bell. "I was actually relieved it wasn't worse," said Stephen Auth, chief investment officer of equities for Federated Investors.

But that rally quickly evaporated as analysts digested the data. Job losses were broad, and "the labor-market remains in free fall," said Nigel Gault, chief U.S. economist for IHS Global Insight. The measure of unemployment that includes people who have stopped looking for work and those who work part-time jobs but would rather work full time jumped to 14.8 percent. Gault estimated that the core unemployment rate was on track to peak above 10 percent.

The financial sector continued to take the brunt of investor fears. After trading below $1 a share earlier this week, Citigroup was up a cent yesterday, to $1.03. Bank of America was down 1 percent, to $3.14, and J.P. Morgan Chase fell 4 percent, to $15.93. Citigroup and J. P. Morgan Chase fell 30 percent this week. Bank of America slumped 21 percent.

Wells Fargo bucked the trend yesterday, surging 6 percent, to $8.61, after announcing that it would cut its dividend 85 percent in a $5-billion-a-year cost-saving move. That will help Wells Fargo pay its government loans more quickly, said Christopher Low, chief economist for FTN Financial.

"Once they pay back the government they can run their bank as they see fit, which investors really like," Low said. It also "gives them a cushion against the recession, a cushion against further increases in loan loss provisions."

Still, Wells Fargo fell 29 percent for the week.

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