Dow Falls on Employment Worries
Stocks fell today on a number of weak signs from the economy and some disappointing earnings reports from major companies. The Dow Jones Industrial Average finished the day 139 points lower, or 0.9%, with only five of the 30 components closing up.
Before markets opened, investors got a stinker of a report from payroll processor ADP, which said only 119,000 jobs were added in April, far below economist projections at 155,000. ADP also revised its March employment count down by 27,000. The report is considered a preview of the official jobs numbers from the Department of Labor, which come out on Friday, and analysts expect an increase of 166,000 nonfarm payroll jobs. In other economic data points, the Institute for Supply Management's Index for April came in slightly below estimates, at 50.7, while March construction spending unexpectedly dropped, falling 1.7%.
The Fed also released its interest rate decision today, saying it will leave current rates, as well as its bond-buying stimulus program, in place. The Fed says it sees "moderate" expansion in economic activity, and blamed fiscal policy, or sequestration, for the economy's inability to accelerate and get back to full employment.
A day after Pfizer's meltdown, Merck shares fared little better on its earnings day. The drugmaker fell 2.8% after seeing a sharp decline in top and bottom lines, down 9% and 8%, respectively. As we saw with Pfizer, generic drugs put a dent in profits from some of its former blockbusters, among them, the baldness drug Propecia, and asthma medication SIngulair, sales of which dropped by $1 billion, or about 75% from last year. Merck also cut its full-year EPS guidance, saying it now sees per-share profits of $3.45-$3.55, down from the previous forecast of $3.60-$3.70.
Among other stocks taking a beating was Verizon , falling 2.8% as the country's No. 1 telecom provider took steps to line up lenders so it can make a $100-billion bid to by the half of Verizon Wireless it doesn't own from Vodafone. Investors also reacted to news that a merger between T-Mobile, the No. 4 carrier, and MetroPCS was completed today. The combination could increase competition in the telecom segment, and challenge Verizon.
Finally, after hours, Facebook reported first-quarter earnings, but shares were essentially unchanged after falling 1.2% during the day. The social-media leader said a big boost in mobile advertising helped advertising increase 38%, beating the street, which expected a 36% jump. Mobile ad revenue contributed 30% of total sales. However, the top-line growth came at a price, as net income grew just 7%, and per-share profits of $0.09 missed estimates of $0.13.
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