Stocks Still Stuck in the Red
07/12/12 - 05:04 PM EDT
NEW YORK (TheStreet
) -- The major U.S. equity averages finished in the red again on Thursday as a halfhearted rally late in the session fell short.
A better than expected initial jobless claims report was viewed with skepticism as investors couldn't shake a malaise fueled by fading hopes for additional stimulus from the world's central banks and a weak start to second-quarter reporting season.
The Dow Jones Industrial Average
fell 31 points, or 0.25%, to close at 12,573. The blue-chip index, which ranged from 12,492 to 12,630 on the day, has now fallen in six straight sessions.
Breadth within the Dow was negative with 22 of the 30 components moving lower with tech names Cisco (CSCO)
, Intel (INTC)
and Microsoft (MSFT)
seeing the biggest declines.
Outsized gains for Merck (MRK)
and Procter & Gamble (PG)
countered the broad weakness though. Merck shares rose more than 4% on favorable news about an osteoporosis drug it's developing, while P&G added more than 3.5% following reports that Bill Ackman's Pershing Square investment vehicle is building a stake in the consumer products giant.
Shares of JPMorgan Chase (JPM)
, which is reporting its quarterly results before Friday's opening bell, finished down 1.6%. The bank is expected to provide details about its disastrous trading loss on a credit derivatives hedge tomorrow with investors anxious to hear just how big the company's liability still is.
The S&P 500
fell nearly 7 points, or 0.50%, at 1335. Unlike the Dow, the benchmark index never quite made it into positive territory.
saw the heaviest selling with the tech-heavy index losing 22 points, or 0.75%, at 2866.
The weakest sectors in the broad market were financials, technology and consumer cyclicals. Health care and capital goods were pockets of strength. Breadth was negative with decliners outpacing advancers by a 2-to-1 ratio on the New York Stock Exchange and a 1.5-to-1 ratio on the Nasdaq.
Before the opening bell, the Labor Department said before the bell that initial jobless claims for the week ended July 7 fell to 350,000, the lowest level seen since March 2008 and a decrease of 26,000 from the upwardly revised 376,000 figure from the preceding week. Economists polled by Thomson Reuters
had forecast a decline to 372,000.
"We note that each summer, auto shutdowns give the government trouble and the seasonal are very unreliable," said Dan Greenhaus, chief global strategist at BTIG. "We absolutely do not believe this is a 'real' number."
"The improvement in claims was due in large part to seasonal factors, as there were fewer seasonal factory shutdowns than normal during the first week of July," said Millan Mulraine, senior U.S. strategist, TD Securities. "This should be corrected in the coming weeks, and the level of claims should revert back to level more consistent with the weak tone in labor market activity, possibly rising back to above the 370K level."
The four-week moving average was 376,500, a decrease of 9,750 from the previous week's average of 386,250.
Continuing claims for the week ended June 30 was 3.304 million, a decrease of 14,000 from the prior week's level of 3.318 million.
Meanwhile, the Bureau of Labor Statistics reported that U.S. import prices fell 2.7% in June, following a 1.2% decrease in May. Lower prices for both fuel and nonfuel imports contributed to the overall decline. U.S. export prices fell 1.7% in June after a 0.4% drop the previous month.
Also, the U.S. Treasury Department said the U.S. government had a budget deficit of $60 billion in June. That puts the federal deficit at $902 billion for fiscal 2012.
Worries about the global economy were front and center overnight. Hong Kong's Hang Seng Stock index closed down 2.03% and the Nikkei settled behind by 1.48% amid fears that forthcoming economic data from China will disappoint. In addition, the Bank of Japan refrained from following the lead of other global central banks in cutting interest rates, pursuing only small adjustments to monetary easing.
That move came a day after the disappointing minutes from the latest U.S. Federal Reserve
policy meeting, which showed that "few" members of the central bank's open market committee were in favor of additional stimulus at the June 19-20 meeting and suggested that macro conditions would have to deteriorate much further in order to justify another round of quantitative easing.
Amid recent indications of a weakening global economy, many analysts are painting a sobering picture of the new earnings season.
For instance, Jeffrey Sica, manager of SICA Wealth Management -- who warns of "the false sense of security created by the notion of a central bank controlled stock market," says he expects "very negative sentiment from companies in appraising their futures."
"The oversimplification of the percentage of companies which meet or exceed EPS will be deceptive," he said. "It is only in future growth that current valuations could be justified ... the negative economic cross currents will undermine the vast majority of S&P companies' ability to grow."
Meanwhile Sica expects banks to report earnings per share which are near or slightly lower than expectations, which will "be no cause of celebration" since banks have "mastered the art of deception" when it comes to earnings per share.
The FTSE in London settled down 0.89% and the DAX in Germany finished lower by 0.46% as global slowdown concerns flooded the markets and overshadowed better-than-expected eurozone industrial production data for May, which had risen.
August crude oil futures rebounded late in the day, settling up 27 cents at $86.08 a barrel. August gold futures lost $10.40 to settle at $1565.30.
The benchmark 10-year Treasury rose 10/32, dropping the yield back to historic lows at 1.478%, while the greenback was up 0.17%, according to the dollar index.
In corporate news, shares of SuperValu (SVU)
fell 49.15% to $2.69 after the Minneapolis-based grocery store operator reported a below-consensus quarterly profit, suspended its dividend and said it's conducting a review of its strategic options.
The company, which is seeking to reduce its debt load by between $450 million and $500 million in fiscal 2013, posted a profit of $41 million, or 19 cents a share, for its fiscal first quarter on sales of $10.6 billion. The average estimate of analysts polled by Thomson Reuters
was for earnings of 38 cents a share on sales of $10.8 billion.
Callaway Golf (ELY)
said late Wednesday it's cutting 12% of its global workforce as part of an effort to generate gross annual savings of $52 million. Shares fell 3.53% to $5.46.
The Carlsbad, Calif.-based golf equipment maker also said it now expects to report a pro forma loss of 55 to 75 cents a share for fiscal 2012. Wall Street's current consensus estimate is for a loss of 21 cents a share for the full year.
Shares of Family Dollar (FDO)
lost 1.83% to $68.65 after Bank of America Merrill Lynch lowered its rating on the stock to underperform and dropped its 12-month price target to $60 from $71, citing rising concerns about the off-price retailer's strategy and execution abilities.
-- Written by Andrea Tse and Alexandria Zendrian in New York.
>To contact the writer of this article, click here: Andrea Tse