Uncertain Labour Market Puts Investors On Edge

Serious doubts about the health of the jobs market and the broader economy have investors on edge.

According to the Associated Press, stocks fell sharply Wednesday after private payroll processor ADP said that 179,000 new private sector jobs were added in April, far lower than economists were expecting. That raised worries about the government’s monthly jobs report for April, which is due out Friday.

The Institute for Supply Management also said its service sector index rose at the slowest pace in 8 months in April, as many companies expressed concerns about higher food and gas prices. The U.S. service industry employs about 90 percent of the U.S. work force, so hints of a slowdown have implications for the overall economy.

“If we look at how healthy the U.S. economy is, I think we’re getting indications that it’s not that healthy,” said Kim Caughey Forrest, equity research analyst at Fort Pitt Capital Group. “I don’t know if it’s sick yet, but it’s not that healthy.”

The Dow Jones industrial average fell 97 points, or 0.8 percent, to 12,710. It had been down as many as 123 points after the ISM index came out. The average of 30 large companies is still up 10 percent for the year following better-than-expected earnings results.

The Standard & Poor’s 500 index fell 10, or 0.7 percent, to 1,347. It remains up 7 percent for the year.

The Nasdaq composite index fell 20, or 0.7 percent, to 2,822. The technology heavy index is up 6 percent this year.

Positive earnings results from companies like Apple, Intel and Caterpillar have sent all three indexes to 2011 highs over the past two weeks. But some of that excitement is fading, said Sam Stovall, chief investment strategist at Standard & Poor’s.

“In a sense, the market is already in digestion mode,” Stovall said. “The earnings have already come out, they were so much better than expected; much of that has already been factored into share prices.”

Earnings results were mixed on Wednesday. Kellogg Co. said its net income fell 12 percent as the world’s biggest cereal maker dealt with higher costs. The results missed analysts’ expectations. Kellogg’s stock fell 2 percent.

Time Warner, the owner of Warner Bros. and HBO, said its first-quarter earnings fell 10 percent because of a lack of hit movies in the period. But advertising revenue rebounded. Still, shares fell 3 percent. .

AOL’s net income dropped sharply as the Internet company reported lower advertising and subscription revenue. Its stock rose 5 percent as display advertising sales showed signs of growth.

Bond prices rose, sending yields lower. The yield on the 10-year Treasury note fell to 3.22 percent from 3.26 percent late Tuesday.