Stocks slipped, led by financials, amid another round of downgrades and lowered estimates.
Giving analysts some food-for-thought, the market largely shrugged off a weaker-than-expected employment report.
Nonfarm payrolls shed 80,000 jobsin March, surpassing the 63,000 drop economists had expected. The Labor Department revised its estimate for job losses for the prior two months to a total of 152,000 from 85,000. Employers pared payrolls across most sectors, with the biggest job cuts in construction and manufacturing. The unemployment rate jumped to 5.1 percent, the highest point since September 2005, from 4.8 percent in February.
"It doesn’t look like we’re going to give back a lot of this week’s gains,” Art Hogan, managing director at Jefferies, told CNBC. “I think the market’s reacting differently to what otherwise would be very negative news. I think that’s a clear sign we’re getting close to the bottom here.”
Art Cashin, floor manager for UBS, attributed the buoyancy in the wake of another weak economic flash point to bargain hunting by investors including sovereign wealth funds.
But he cautions that we shouldn't get a false sense of security that the worst is already priced into the market. "This is an interim bottom," Cashin told CNBC. "The two phases of this thing were: fears about assets and financials," which has been assuaged by Federal Reserve relief, and second, "I think there will be another bottom related to the recession," Cashin said. If conventional wisdom follows -- that this will be short and shallow recession -- then we may just test the January lows, Cashin said, but consider yourself warned: a new low is still possible, according to Cashin.
A day earlier, the jobless-claims report showed new claims jumped by 38,000 the highest reading since September 2005.
Recession fears have been mounting, with even the usually tight-lipped Fed officials hinting about a contraction in growth.
"The economy has all but stalled and could contract over the first half of the year," San Francisco Federal Reserve President Janet Yellen, who is not a voter on the policy-setting committee in 2008, said on Thursday, according to Reuters.
Yellen's remarks come just a day after Federal Reserve Chairman Ben Bernanke said that a recession was possible.
Banks Trade Downgrades
For those hoping for a bottom in financial stocks, they're going to have to keep looking.
Financial stocks fell further Friday as banks continued to downgrade and lower estimates for each other.
JPMorgan cut its 2008 earnings forecast for large investment banks, including Citigroup , Bank of America and Wachovia , citing large loan reserves and credit losses. The firm said, however, it expects write-downs to be sequentially lower in the first quarter.
Bank of America slashed its price target on Merrill Lynch stock
In other financial-sector news, John Reed, one of the architects of the $166 billion merger that created Citigroup in 1998, told the Financial Times that the merger "clearly has to be seen as a mistake."
Among the exceptions in the banking industry, American depositary shares of UBS advanced amid speculation that the bank may take more aggressive steps after taking a pounding from the subprime crisis. Former president Luqman Arnold, who was ousted from the firm in 2001 and is currently going head-to-head with the firm, told CNBC Europe that complete breakup of the firm may not be possible right now but a massive restructuring is necessary.
Arnold's investment group Olivant, which has more than a 0.7 percent stake in UBS, sent a letter to UBS's board on Thursday, suggesting the sale of the asset-management business and the separation of its wealth-management and investment-bank units as possibilities.
Apple said on Thursday its iTunes online music store has surpassed Wal-Mart Stores to become the largest music retailer in the United States.
Also in the technology sector, mobile-phone maker Motorola said after the bell that it was cutting jobs and paying severance payments to around 2,600 workers in an attempt to cut costs.
The announcement comes on the heels of news that job cuts are likely at other technology companies, including Google and Dell.
On the earnings front, shares of Mosaic jumped after the fertilizer maker reported earnings of $1.17 a share that beat analyst estimates.
Family Dollar shares skidded after the dollar store beat estimates with earnings of 45 cents a share but lowered its outlook.
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