Jobless Spike Rattles Markets

A spike in the unemployment rate to the highest level in nearly eight years gave investors yet another reason Friday to doubt the strength of the economy and to unload stocks. Tech issues fell for the third straight session, while blue chips broke a three-day winning streak.

Friday’s decline only worsened a slump that has dragged the Dow Jones industrial average down 5.9% from its 2002 closing high of 10,635.25, reached March 19, while the Nasdaq composite index has suffered a much steeper slide, falling 21.7% from its high close for the year--2,059.38 back on Jan. 4.

“We are in a bear market, particularly in the Nasdaq area of the market. The excess we built up over many years is being taken out of the market,” said Mark Minervini, president of Quantech Research Group. “Just like it went to extreme levels on the upside, it is going to extreme levels on the downside.”

Nasdaq, a proxy for the troubled tech industry, fell 31.79 points, or 1.9%, to 1,613.03--its 12th loss in the last 15 sessions. The Dow slumped 85.24 points, or 0.8%, to 10,006.63, falling a day after chalking up its first three-day winning streak since mid-March. The broader Standard & Poor’s 500 index was down 11.13 points, or 1%, at 1,073.43.

Despite the declines, it could have been worse. Nasdaq was down almost 40 points early on and ended with losers outnumbering winners by a slim 6-to-5 margin. The Dow rebounded from an early drop of almost 150 points, with winners and losers about even on the New York Stock Exchange by the closing bell. Volume was moderate.

Nasdaq lost 3% for the week and has fallen seven of the last eight weeks. The S&P; 500 fell 0.3% for the week, and the Dow gained 1%.

Wall Street was disappointed by a weaker-than-expected unemployment report for April. The nation’s jobless rate jumped to 6% in April from 5.7% in March--the highest level since August 1994. A report that growth in the nation’s services sector slowed in April also rattled investors.

Tech companies fell on a variety of indications that their business slump will linger. A Merrill Lynch note to investors said the profit outlook was still unclear for most semiconductor companies and would continue to be through the second quarter. Losers among chip makers included Texas Instruments, down $1.49 to $28.30, and Intel, which fell $1.31 to $26.56.

Oracle slipped 12 cents to $8.43 after Goldman Sachs and SG Cowen reduced their outlooks on the software maker, whose shares are off 39% year to date. Microsoft, meanwhile, fell $1.65 to $49.56.

Uncertain about earnings due next week from Cisco Systems, investors bid the network equipment leader down 50 cents to $13.14.

The tech sector has suffered the brunt of selling because it is expected to be the last to recover from the recession. Another factor in the tech sell-off has been the fact that investors ran those stocks up the most in the last bull market, when companies including Cisco were trading at 100 times their earnings.

In other market news:

* Blue chips fell as investors cashed in profits after the three-session rally. Wal-Mart fell $1.40 to $55.25, Coca-Cola declined 78 cents to $56.86, and GM stumbled 56 cents to $65.68.

* Gold rose to its highest price in more than two years, gaining $3.90 to $312.20 an ounce in New York trading as the jump in the jobless rate rattled the already slumping dollar. The Amex index of gold mining stocks rose 3.1%.

* The Amex index of biotech stocks fell 1.5% to a new 52-week low. It was led lower by the likes of Vertex Pharmaceuticals, down $1.03 to $18.19, and Amgen, off $1.52 to $48.80.

* WorldCom was the most active Nasdaq stock and slumped 24 cents, or 11.8%, to $1.79, on fears that problems at the No. 2 U.S. long-distance telephone and data services company might intensify if new management fails to quickly cut expenses, pare debt and stave off a cash crunch.

Market Roundup, C4-5