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US stocks mostly flat after weak jobs report

Bernard Condon, AP Business Writer

A specialist works on the floor of the New York Stock Exchange Friday, Sept. 7, 2012. Stocks are opening mixed on Wall Street following news that the U.S. economy added fewer jobs than expected in August. (AP Photo/Richard Drew)

NEW YORK (AP) -- Stocks on Wall Street are edging between small gains and losses following news that the U.S. economy added fewer jobs than expected in August.

The Dow Jones industrial average was down 18 points at 13,274 at 2:15 EDT Friday. The Standard & Poor's 500 was up three points at 1,436. The Nasdaq was down three at 3,133.

The government reported that 96,000 jobs were created in the U.S. last month, fewer than economists had forecast. The unemployment rate fell to 8.1 percent from 8.3 percent, but only because more people gave up looking for work.

Tech bellwether Intel dealt the market a blow by cutting its revenue outlook because of weak demand for its semiconductors. Intel fell 95 cents, or nearly 4 percent, to $24.15.

The flat trading for the major indexes Friday followed big gains Thursday. U.S. stocks hit four-year highs after the European Central Bank announced plans to buy an unlimited amount of short-term government bonds from struggling countries in the region such as Italy and Spain. The hope is that the borrowing costs of those countries will fall, making a breakup of the 17-nation euro zone less likely.

Steven Ricchiuto, chief economist at Mizuho Securities, said the weak U.S. jobs report means the Federal Reserve is more likely to announce steps at its meeting next week to keep interest rates low and encourage lending. He thinks the Fed will announce that it will hold benchmark rates near zero through 2015 and, possibly, launch a third round of bond purchases.

"The economy is still struggling, and so it's subject to shocks from overseas," Ricchiuto said. "We're going to get more stimulus from the Fed."

Shortly after jobs numbers were released, analysts from RBS told investors in a note that they see the likelihood of the Fed announcing new bond purchases next week at 90 percent. "We expect the Fed to act in September," they wrote.

Treasury prices rose slightly, sending their yields lower. The yield on the benchmark 10-year Treasury note fell to 1.66 percent from 1.67 percent late Thursday.

Overseas, the new bond-buying plan by the European Central Bank sent stocks up sharply. The Hang Seng index in China rose 4 percent, and Japan's Nikkei rose 2 percent.

Most major markets in Europe rose, too. Benchmark indexes rose 0.7 percent in Germany and 0.3 percent in France. Italy's main index rose 4 percent.

In U.S. trading, materials companies rose 1.8 percent, the biggest gain among the S&P 500's ten industry sectors. The biggest losers were telecommunication companies, down 0.9 percent.

Intel followed several other major companies in reducing its profit forecast, including FedEx. The world's second-largest package delivery company lowered its forecast for earnings earlier this week, citing the slowing global economy.

Overall, for every three companies in the S&P 500 telling investors to lower their expectations for future earnings, only one is saying to raise them, according to S&P Capital IQ, a research firm.

Wall Street analysts estimate earnings for companies in the S&P 500 will fall 1.8 percent in the current quarter, the first drop since the Great Recession, according to S&P Capital IQ. They expect earnings grew 0.9 percent in the April-June quarter, the slowest quarterly pace in three years.

Among stocks making big moves, Amazon rose $6.35, or 2.5 percent, to $257.73. The company unveiled four new Kindle tablet computers Thursday, including ones with larger color screens.

Smith & Wesson rose $1.25, or 14 percent, to $10.25 on surging gun sales and a raised profit forecast. The gun company said it expects earnings for the quarter ending October to climb to as much as twice what analysts had expected.

Dell rose 13 cents, or 1.2 percent, to $10.65 after announcing it would pay a dividend of eight cents per share in October. It is the computer maker's first cash dividend.

Glencore International fell 14 cents, or nearly 4 percent, to $3.78. The commodities trader said it is prepared to raise its offer to buy mining company Xstrata PLC. Xstrata rose 35 cents, or nearly 4 percent, to $10.14.