A Step Backward

Ominous signs of an impending recession and a bankruptcy in the utility sector sent investors selling Friday, leaving major indexes down for the week despite a boisterous rally on Thursday.

The Dow Jones industrial average sank 126.96 points to end the week at 9,791.09. The Nasdaq fell to 1,720.36, a loss of 64.64 points on the day, while the Standard & Poor's 500 shed 23.01, closing at 1,128.43.

The government Friday reported that the nation's unemployment rate climbed to 4.3 percent in March, the highest level in 20 months, as businesses cut 86,000 jobs. The payroll reduction was the largest since the end of 1991 and dimmed hopes for a quick recovery by the end of this year.

Meanwhile, Pacific Gas & Electric, one of three major California utilities plunged into financial trouble by rising wholesale power costs and a restrictive deregulation scheme, declared bankruptcy.

CBS MarketWatch reported the declaration sent chills through the financial sector, comprised of many companies that hold the debts PG&E now says it simply can't pay. In terms of the company's assets, it is the third-biggest bankruptcy in American history.

The bulls had stampeded on Wall Street Thursday, handing the Dow industrial average its second-biggest point gain ever — over 400 points — and sending the Nasdaq up a smashing 8.9 percent. CBS News Correspondent Anthony Mason reports good earnings news from Dell and Alcoa spurred the rally.

But despite that big advance, the Dow still posted a loss for the week, having plunged 392 points over Monday and Tuesday in addition to Friday's losses.

However, the decline in new jobs last month marked a much weaker performance than many analysts were expecting. They were forecasting a gain of around 50,000 in payrolls. The 86,000 drop was the largest since November 1991, when payrolls plummeted by 94,000.

The plunge in payrolls last month marked the first decline since August 2000, when payrolls fell by 79,000.

The weakness was widespread, with losses at bars and restaurants, department stores, car dealers and temporary employment services. But manufacturers continued to be the hardest hit.

Manufacturing, which has been bearing the brunt of the economic slowdown, lost a huge 81,000 jobs last month, with cuts affecting a wide range of industries — from auto manufacturing to industrial machinery production. Since last June, lost factory jobs totaled 451,000.

Seeking to prevent the economy from toppling into recession, the Federal Reserve has cut interest rates three times this year, totaling 1.5 percentage points.

Economists expect another cut before or at the Fed's next scheduled meeting on May 15 and are hoping aggressive action by the central bank will allow the country to skirt a full-blown downturn.

The Fed's rate reductions are designed to rejuvenate economic growth. But President Bush says more needs to be done, namely quick enactment of his $1.6 trillion tax cut. The Senate Friday passed a slimmed-down, $1.2 trillion tax cut, but the budget is not yet finalized.

Economic growth slowed to an annual rate of just 1 percent in the last three months of 2000, the weakest performance in more than five years.

Average hourly earnings, a key gauge of inflation, rose in March by 0.4 percent to $14.17 an hour, slightly faster than many analysts were expecting, but down from a 0.6 percent increase the month before. The length of the average workweek edged up to 34.3 hours from 34.2 hours in February.

Some companies are coping with the weak economy by sharply cutting production, leading to reductions in workers' hours and overtime, and forcing thousands of layoffs.

DuPont announced this week that iwould cut 4,000 jobs. That followed earlier announcement of other layoffs from some of the biggest names in U.S. business, including DaimlerChrysler, Motorola, Lucent Technologies and Procter & Gamble.

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