Wall Street slipped into the doldrums Thursday awaiting Friday’s critical unemployment report.
The Dow Jones industrial average hovered around its opening level most of the day, closing off 1.78 points at 3695.97. Volume on the Big Board was a subdued, but not comatose, 257 million shares.
The good news: The stock market held together in the face of a possibly strong employment report, which could trigger another interest-rate hike by the Federal Reserve Board.
The bad news: A strong employment report could trigger another Fed hike, and the stock market then could go into the tank.
Carl Palash, chief economist for MCM MoneyWatch in New York, said the monthly payroll and unemployment rate data will help determine the magnitude of the next round of Federal Reserve interest-rate tightening, but some rate increase is nearly a certainty.
If payrolls grew by more than 200,000 and unemployment declined, Palash expects the Fed to boost the federal funds rate-the rate banks charge one another for overnight loans-to 4 percent from 3.5 percent and also to increase the Fed discount rate on loans to banks to 3.5 percent from 3 percent.
If the jobs report is less robust, Palash predicts smaller rate increases.
Palash said the Fed, which holds its next Open Market Committee meeting May 17, is focusing on inflation fears, not on the dollar.
In March, the economy added 456,000 jobs, the largest increase since October 1987. That news sent bonds into a tailspin, driving up interest rates, on Good Friday.
In Thursday’s trading, retail stocks were a bright spot, with some stores reporting good April sales. Among Chicago-area companies, Sears Roebuck gained 62 cents to $48, Spiegel rose 87 cents to $24, and Milwaukee-based Kohl’s added 37 cents to $52.37.
All three automakers fell after reporting softer April sales on Wednesday. Ford lost 50 cents to $59, General Motors dropped $1.25 to $55.50, and Chrysler lost $1.25 to $45.75.
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Chicago’s Amoco told employees in March that the company’s stock had performed so poorly that another round of restructuring had to be implemented. Though the company has yet to spell out all the details, S.G. Warburg, of New York, issued a recommendation to investors to add to their positions in the oil concern.
“Continued cost-cutting, incremental foreign production and an early increase in chemical profitability are combining to give Amoco added earnings momentum,” said Warburg analyst Mary K. Quinn.
“Another round of restructuring aimed at high corporate overhead should further enhance profitability.” Quinn said “fair value” for the stock would be in the low to mid $60s range, about 10 percent above present levels, and she expected Amoco to trade at that level in the next nine months to a year. The stock closed unchanged at $55.
Jim Fair, Amoco’s spokesman, said at least three brokerage or research houses have upgraded Amoco since the second round of restructuring first was reported.
Telular, of Buffalo Grove, which saw Motorola pick up an extra $12 million of its stock Wednesday, got more good news.
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A federal court in Los Angeles ruled in favor of Telular, dismissing one of three claims against a key patent for Telular technology that enables standard telephone equipment to operate over wireless networks.
In the high-tech world, such suits have become commonplace. But the on-going battles between Intel and Advanced Micro Devices show they can impact business. The court has yet to rule on the other two claims by Alliance Research, a Los Angeles cellular telephone accessory manufacturer.
Telular’s stock, which rose $2 Wednesday, gained another $2 to close at $16.25 Thursday.
Whitman, of Rolling Meadows, increased its regular quarterly dividend to 8.5 cents a share, an annual rate of 34 cents a share, 13 percent above its previous rate. Whitman, a cash-rich but growth-poor company, operates Pepsi-Cola General Bottlers, Midas mufflers and Hussman commercial refrigerators.