Stocks End Down on Interest Rate Fears

U.S. stocks declined Friday, ending the week in negative territory, as a report showing stronger job and wage growth fueled fears the Federal Reserve would raise interest rates further to curb inflation and some earnings disappointed investors.

The technology sector skidded on a steep drop in shares of online retailer Inc. (AMZN), a day after its revenue fell short of Wall Street's target. A string of other disappointing reports in the week, including Web search company Google Inc.'s (GOOG) first profit shortfall since it became a public company in August 2004, added to tech's woes.

The Dow Jones industrial average was down 58.36 points, or 0.54 percent, at 10,793.62. The Standard & Poor's 500 Index was down 6.81 points, or 0.54 percent, at 1,264.03. The Nasdaq Composite Index was down 18.99 points, or 0.83 percent, at 2,262.58.

For the week, the Dow ended down 1.04 percent, the S&P 500 lost 1.54 percent and the Nasdaq fell 1.81 percent.

The tightening in the labor market suggested by Friday's data and Thursday's statistics showing a drop in fourth-quarter productivity and a rise in unit labor costs raised warning flags about the economy, analysts said.

"These numbers combined with yesterday's ... gives the Fed a lot of ammunition to raise interest rates and if you have, at the same time, the economy slowing, that's just going to make a really difficult environment for stocks," said Hans Olsen, chief investment officer at Bingham Legg Advisers.

The Labor Department said the U.S. unemployment rate fell to 4.7 percent, its lowest level since July 2001. January payrolls added 193,000 jobs, which was below expectations, but payroll numbers for December and November were revised higher, depicting strength in the labor market. Average hourly earnings have risen 3.3 percent in the past 12 months, the largest for such a period in nearly three years.

The Fed raised rates on Tuesday and hinted more rate hikes might be needed.

The concerns about rising rates prompted some investors to sell shares of banks and financial services companies. The stock of Fannie Mae fell 2.5 percent, or $1.44, to $55.96, while shares of Dow component JPMorgan Chase & Co. lost 1.2 percent, or 46 cents, to $39.53.

Rising rates make it harder for banks to make money on loans. The S&P Financial Sector Index was down 0.5 percent, and about two-thirds of the stocks in the index fell.

In Nasdaq trading, shares tumbled 10.3 percent, or $4.41, to $38.33, while Google fell 3.7 percent, or about $14.49, to $381.56. Google was the biggest drag on the Nasdaq 100, while Amazon ranked third.

Shares of International Business Machines (IBM), the world's biggest computer company, fell 1.6 percent, or $1.26, to $79.97 and ranked as the biggest drag on the Dow.

Shares of online marketplace eBay Inc. (EBAY) shed 2.4 percent, or $1.00, to $40.58 and weighed on the Nasdaq.

Energy shares fell as crude oil futures prices finished the week down more than $2 a barrel. Shares of ConocoPhillips (COP) slipped 2.8 percent, or $1.81, to $62.50, while Chevron Corp. (CVX) lost 1.7 percent, or $1.01, to $57.50, on the New York Stock Exchange.

U.S. crude oil for March delivery rose 69 cents to settle at $65.37 a barrel. During the week, it fell as low as $63.95 and climbed as high as $69.

In the bond market, two-year U.S. Treasury notes held a yield premium over 10-year notes, with the two-year note's yield 5 basis points above the 10-year note's yield. This yield-curve inversion has often preceded recessions and added to stock market jitters Friday.

Trading was active on the NYSE, with about 1.76 billion shares changing hands, above last year's daily average of 1.61 billion, while on Nasdaq, about 2.26 billion shares traded, above last year's daily average of 1.80 billion.

Declining stocks outnumbered advancing ones by a ratio of about 8 to 5 on the NYSE and by nearly 9 to 7 on Nasdaq.

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