Stocks close flat as unemployment rate jumps, post gains for the week
NEW YORK -- With unemployment still rising, investors are questioning if stocks should be, too.
Stocks ended a volatile day Friday little changed after the government reported a spike in the unemployment rate to 9.4% in May, the highest level in more than 25 years, even as the pace of layoffs eased more than expected.
The Dow Jones industrial average finished up almost 13 points at 8,763.13, just 14 points below where it started the year. The index had advanced as much as 89 points and moved in and out of positive territory for 2009 during the day, but the jump in the unemployment rate proved to be too tough to ignore.
"When nearly 10% of people are out of work, it's hard for me to say things are so positive," said Anthony Conroy, head trader for BNY ConvergEx Group.
Bond prices tumbled again, sending long-term yields to their highest levels this year. Those yields are closely tied to interest rates on mortgages and other kinds of consumer loans.
Investors track unemployment closely since jobless people are far more likely to default on their debts and slash their spending, potentially exacerbating two of the most troubled spots in the economy right now: Consumer spending and the ailing financial industry.
Despite the troubling jobs data, the Dow and other major stock indexes finished the week higher. Although the Dow is still 38.1% below its October 2007 high, it has charged ahead 33.9% since hitting a 12-year low in early March.
"The markets are feeling better even though the economy is still sick," Conroy said.
The Dow rose 12.89, or 0.2%, to 8,763.13. The Standard & Poor's 500 index fell 2.37, or 0.3%, to 940.09, and the Nasdaq composite index fell 0.60, or less than 0.1%, to 1,849.42.
The Dow is up 3% for the week, while the S&P 500 is up 2% and the Nasdaq is up 3.7%. It was the major indexes' third straight week of gains.
The Labor Department said employers cut 345,000 jobs in May, far less than the 520,000 economists predicted, a hopeful sign for the job market. But the report also showed that the unemployment rate surged to 9.4% from 8.9% in April, suggesting that companies are still reluctant to hire.
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