Jobs Data Weigh Down U.S. Stocks
Updated from 11:37 a.m. EDT
Stocks in the U.S. were dealt a serious blow Thursday as grim sales reports from the retail sector and rising unemployment claims enhanced investor pessimism.
The
Dow Jones Industrial Average
dropped 241 points at 11,293, and the
lost 25 points to 1250. The
Nasdaq
stumbled 46 points to 2288.
The day's docket included a hefty serving of additional economic information. Automatic Data Processing's August employment figures showed private payrolls down 33,000, a slightly wider decline than estimates. The Department of Labor's jobless claims for the week ended Aug. 30 came in at 444,000, higher than expectations for 420,000 new claims.
The Labor Department's second-quarter productivity increased at an annual rate of 4.3%, ahead of estimates of 3.5% and up from 2.2% in the first quarter. Labor costs, meanwhile, declined at an annualized rate of 0.5%.
In one bright spot, the Institute for Supply Management's nonmanufacturing index came in at 50.6, up from 49.5 and ahead of analyst expectations. Weekly oil inventories from the Energy Information Administration are due out later.
Following the close of their respective rate meetings, the Bank of England and the European Central Bank both announced they would leave their key interest rates unchanged.
Recent declines in commodity prices should clearly be helping the market, said Paul Mendelsohn, chief investment strategist at Windham Financial. Other factors continue to hinder stocks' performance, he said. Investors are hesitant to buy ahead of tomorrow's employment report and may be taking additional time off during the holiday-shortened week, he said.
Regarding jobless claims, Mendelsohn said that investors will remain cautious as the unemployment number remains between 400,000 and 450,000. "If we get past 450,000 that would indicate the slowdown is really taking hold," he said.
Recent data, said Mendelsohn, leave investors uncertain about the economy's direction. "It's really been mixed, we've had good, we've had bad, it's really not conclusive." He said that exports have continued to bolster the economy, but a slowdown abroad may weaken exports in the future. Meanwhile, a slowdown in consumer spending continues to hinder the economy.
"The positive is ... those fundamentals are helping to create that drop in commodity prices," Mendelsohn said. "Eventually energy prices should come down to a level where the consumer feels comfortable and the economy can restart itself." He said that crude-oil prices need to dip into the $90-a-barrel range before the consumer feels an impact.
In company news, a slew of retailers reported same-store sales for August.
Wal-Mart
(WMT) - Get Free Report
showed improved sales that beat estimates, while specialty retailers such as
Wet Seal
undefined
,
Gap
(GPS) - Get Free Report
and
Limited
(LTD)
reported declines in same-store sales.
Elsewhere,
Bloomberg
reported that
Merrill Lynch
(MER)
faces difficulties as it tries to sell parts of its loan portfolio to Korea Asset Management Corp.
Also dealing with hard-to-value assets, insurance giant
AIG
(AIG) - Get Free Report
is considering forming a new company to get rid of its mortgage-related securities, according to a report in
The New York Post
.
Boeing
(BA) - Get Free Report
averted a strike by its largest union, the International Association of Machinists and Aerospace Workers. The union had voted to strike after negotiations for a new three-year contract failed, but federal mediators brokered a 48-hour postponement of the walkout.
As to earnings, after the close Wednesday tax-services provider
H&R Block
(HRB) - Get Free Report
announced a narrowed quarterly loss. Homebuilder
Hovnanian
(HOV) - Get Free Report
reported a loss that was wider than a year ago.
Fellow construction firm
Toll Brothers
(TOL) - Get Free Report
likewise had bad news, swinging to a third-quarter loss on falling revenue stemming from the ongoing housing crisis.
Looking at commodities, the Energy Information Administration reported that inventories declined by 1.9 million barrels for the week ended August 30. Gasoline inventories were down by 1 million barrels. Crude oil was down $1.32 at $108.03 a barrel, and gold was losing $2 at $806.20 an ounce.
Longer-dated U.S. Treasuries were edging higher. The 10-year was up 12/32, yielding 3.65%, and the 30-year was adding 22/32 to yield 4.28%. The dollar was gaining on the euro and pound but slipping against the yen.
Major global exchanges, including the FTSE in London, the Dax in Frankfort, the Nikkei in Japan and the Hang Seng in Hong Kong, were mostly trading lower.
