Stocks drop on job losses; euro holds gains

By Jennifer Ablan

NEW YORK (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) dropped on Wednesday after a private report showed an unexpected drop in private-sector jobs, while the euro extended gains against the dollar on quarter-end buying.

Prices of U.S. Treasuries rose as the ADP report on private sector employment dented hopes of improvements in the economy and as buying by fund managers to meet quarter-end needs fueled bids.

U.S. companies cut an estimated 23,000 jobs this month, ADP Employer Services reported. Economists had expected an increase of 40,000 jobs, and the report sparked renewed worries about the outlook for the labor market ahead of Friday’s release of the U.S. government’s closely watched monthly payrolls report.

The ADP report “is not a good sign; we want to see some job growth,” Sasha Kostadinov, portfolio manager at Shaker Investments in Cleveland. “Friday’s jobs data is going to be a big number because people are starting to get anxious to see some growth.”

Tom Sowanick, chief investment officer of the Omnivest Group in Princeton, New Jersey, noted that “markets are also down because it is the end of the quarter and some investors are locking in gains on this last day.”

Despite the weakness in U.S. stocks (Read more about the stock market today. ), the benchmark S&P 500 posted its fourth straight quarter of gains, rising 4.9 percent.

In Europe, the FTSEurofirst 300 index of top European shares also marked a fourth straight quarter of gains on Wednesday, although the pan-European index fell on the day.

On Wall Street, sentiment was also pressured by weaker regional manufacturing data. The Chicago Purchasing Manager’s Index showed business activity in the U.S. Midwest slipped to a reading of 58.8 in March, below economists’ expectations.

The Dow Jones industrial average (.DJI: ) was down 50.79 points, or 0.47 percent, at 10,856.63, while the Standard & Poor’s 500 Index (.SPX: ) was down 3.84 points, or 0.33 percent, at 1,169.43. The Nasdaq Composite Index (.IXIC: ) was down 12.73 points, or 0.53 percent, at 2,397.96.

For the quarter, the Dow rose 4.1 percent and the Nasdaq was up 5.7 percent.

In London, the FTSEurofirst 300 index (.FTEU3: ) closed down 0.07 percent at 1,078.58 points. The index was up 3.1 percent for the first quarter.

Financial stocks were among the top losers on Wednesday. The STOXX Europe 600 banking index (.SX7P: ) fell 0.5 percent a day after climbing to its highest level in more than two months.

Moody’s Investors Service on Wednesday downgraded its rating on five Greek banks, citing weakened financial strength and pressures from the country’s fiscal challenges.

The MSCI world equity index .MIWD00000PUS ended slightly lower, down 0.04 percent at 307.36, while the emerging stocks (.MSCIEF: ) were up at 0.21 percent.

U.S. Treasuries rose as the ADP jobs data reduced bets on the strength of the economy.

“This throws a bit of cold water on a barn-burner number on Friday,” said Ken Mayland, President of Clearview Economics LLC in Pepper Pike, Ohio.

Analysts polled by Reuters forecast a 190,000 job gain in March, which would be the second monthly increase since the recession began in December 2007.

On the day, the benchmark 10-year U.S. Treasury note was up 6/32, with the yield at 3.83 percent, while the 2-year U.S. Treasury note was up 2/32, with the yield at 1.02 percent.

The 30-year U.S. Treasury bond was up 15/32, with the yield at 4.72 percent.

EURO UP ON QUARTER-END BUYING

In currency markets, the dollar hit a three-month high against the yen and remained on track for its best quarterly performance in a year on the view that the U.S. economy continues to improve, despite Wednesday’s jobs data.

Against the Japanese yen, the dollar was up 1.13 percent at 93.48 yen from a previous session close of 92.440.

Analysts expect the U.S. government’s report on March payrolls to show an increase in jobs, albeit aided by temporary government hiring for the 2010 U.S. census.

The euro was up 0.74 percent at $1.3509 from a previous session close of $1.3410. The euro extended gains against the dollar to session peaks above $1.35, boosted largely by quarter-end buying.

That said, traders warned euro zone fiscal worries are likely to limit further gains.

“Expect range bound movement until summer with the wild card being Greece,” said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey. “The dollar is still the safe-haven currency and the euro will remain weak until the Greek problems is settled or their debt rollover in April and May is completed and accepted by the market. If there is any contagion, the dollar will soar.”

The dollar was down against a basket of major trading-partner currencies, with the U.S. Dollar Index (.DXY: ) down 0.48 percent at 81.079 from a previous session close of 81.470.

In energy and commodities prices, U.S. light sweet crude oil CLc1> rose 92 cents, or 1.12 percent, to $83.29 per barrel, while spot gold prices rose $10.30, or 0.93 percent, to $1112.90. The Reuters/Jefferies CRB Index (.CRB: ) was down 0.38 points, or 0.14 percent, at 273.34.

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(Additional reporting by Steven C. Johnson in New York; Editing by Leslie Adler)

Stocks drop on job losses; euro holds gains