Major market indices battle back Friday, but finish the week with large losses. The Dow ($INDU) gained 32.73 points to close the session at 11,220.96. The S&P 500 ($SPX) added 5.48 points to 1,242.31. The Nasdaq ($COMPQ) gave up 3.16 points to 2,255.88. Volume was moderate on the session with 1.20 billion shares traded on the NYSE and 2.26 billion shares exchanged on the Naz. Market breadth was mixed with the Big Board positive by a 16-to-15 margin, but the Naz negative by a 13-to-15 margin.

The employment situation report was a big disappointment, but stocks managed to close the session well off intraday lows. Besides a sharp rise in the unemployment rate and another month of decreasing payrolls, Nokia (NOK) lowered its market share forecast and Goldman Sachs lowered its rating on Merrill Lynch (MER) to a “Sell”. Even so, after falling into bear market territory Thursday, the SPX did find some support to end the week.

Nonfarm payrolls fell by 85,000 in August, about 10K more than anticipated and the eighth consecutive month of declines. However, it was the unemployment rate that really surprised economists. In July, the unemployment rate sat at 5.7 percent with estimates for a gain of a tenth in August. However, the unemployment rate soared to 6.1 percent, its highest rate since 2003.

The recent bout of disappointing economic news has lowered the outlook for global economic growth. This news has pushed crude prices lower with oil down $1.66 a barrel Friday to $106.23. However, it also has raised concerns about a possible recession and it is this that has really hurt stocks. The Fed is now expected to stay on the sidelines with interest rates throughout 2008 on the view there are still too many risks to economic growth. Most Fed leaders feel that pricing pressures will fade as economic growth eases.

Merger news was a positive for stocks Friday with UST (UST) and SanDisk (SNDK) both seeing strong gains on takeover rumors. The New York Times reported that Altria (MO) is in advanced talks to buy smokeless tobacco maker UST. This news pushed UST shares higher by 25.1 percent. Shares of SNDK gained 31 percent to $17.64 on rumors Samsung is interested in buying the flash-memory maker.

Shares of mobile phone giant Nokia fell 7.6 percent after the company announced that third quarter market share would come in below expectations. The company noted that it didn’t undertake sharp discounts that many companies did in the quarter and this will hurt market share. Shares of MER actually rose on the session by two percent despite being downgraded to “Sell” at Goldman. Goldman expects MER to announce more write-downs and feels that MER is overvalued at its current price.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site