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Job losses drag down techs

Improvement in consumer confidence isn't enough to revive the overall markets or the tech sector, despite a wealth of upbeat news from the likes of AMD, Intel and Sun.

3 min read
Good news from the technology sector wasn't enough to excite investors coping with dour unemployment figures from the government Friday.

The Dow Jones industrial average was down 49.68 to 10,049.46, and the Nasdaq composite index fell 33.29 points to 2,020.98. CNET's technology indexes were mixed.

The Labor Department painted a grim picture of the job market Friday, reporting that the unemployment rate in November reached its highest level in more than six years. The rate shot up to 5.7 percent, with 331,000 jobs lost. That was far worse than the 189,000 jobs economists had expected.

The department also revised the number of job losses for October. It bumped it up to 468,000, from the 415,000 it initially reported.

Economists said the weak employment report means the Federal Reserve will probably continue easing interest rates. The Fed is scheduled to set interest rates Dec. 11.

The data is "unambiguous in showing a weaker-than-expected labor market," Henry Willmore, senior economist at Barclays Capital, wrote in a research note Friday. "We continue to expect a 25 (basis point) ease from the Fed next week."

A report on consumer sentiment from the University of Michigan gave investors some upbeat economic news. The consumer sentiment index rose for a third straight month to 85.8 in early December, from 83.9 in November. That was higher than the 84.1 economists had expected, and well above its recent low of 81.8 struck in September.

Economists closely watch University of Michigan's index for clues about future consumer behavior, because consumer spending makes up two-thirds of U.S. economic activity.

Consumers' view of their present financial situation edged up slightly since November, according to the report. Also rising was the index that follows consumers' expectations about the next 12 months.

But improvement in consumer confidence wasn't enough to revive the overall markets, or the tech sector, despite a wealth of upbeat news from the likes of Advanced Micro Devices, Intel and Sun Microsystems.

Intel fell 92 cents to $33.24, even after reporting that fourth-quarter sales would be better than expected. Some analysts had already inched up expectations in recent days in anticipation of the news.

The chipmaker said Thursday that fourth-quarter sales would be $6.7 billion to $6.9 billion, compared with an October estimate of $6.2 billion to $6.8 billion.

Fellow microprocessor maker AMD rose $1.60 to $17.85 after news that it expects higher sales in the fourth quarter and a return to profitability in 2002.

The chipmaker said fourth-quarter sales will climb at least 10 percent from third-quarter sales of $765.9 million, thanks in part to strong sales of its new Athlon XP chip. Last month the company said revenue would be flat or up by a high single-digit percentage.

Sun, down 76 cents to $13.39, was the most actively traded stock on the Nasdaq. The maker of server computers said orders in the second quarter ending Dec. 31 are coming in according to its earlier forecast. Although company executives would not give a specific range for second-quarter revenue, Sun reiterated that it expects sales to improve from the first quarter, when it reported $2.9 billion in revenue. Management also said Sun expects to be profitable by June.

Sonus Networks was up 80 cents to $6.98. Pacific Crest Securities said in a morning research note that "rumors (are) beginning to swirl that it will be part of a $4.1 (billion) Sprint deal." The company also plans to attend a Lehman Brothers conference Friday.

E*Trade was up 66 cents to $10.46 after raising estimates for its fiscal 2002 results and announcing plans to buy back shares. The online brokerage house now expects to report earnings between 40 cents and 50 cents per share for ongoing operations in 2002. Analysts had been expecting that the company would post a profit of 34 cents per share.

Integrated Device Technology was off $5.33 to $25.75 after the maker of microchips for networking and communications devices warned that its third-quarter revenue would fall 15 percent to 20 percent below the previous quarter.

Among other actively traded shares, Cisco Systems fell 63 cents to $21.16; Oracle gained a penny to $15.91; and Microsoft fell 82 cents to $67.83.

AOL Time Warner lost $1.77 to $32.98. Yahoo slipped $1.35 cents to $17.67, and Amazon.com was off 39 cents to $11.71.

Staff and Reuters contributed to this report.