(Updated from 4:05 p.m. EDT)
Ahead of tomorrow's
employment report, investors took a cautious stance -- and profits -- as government data released today showed
record levels of jobless claims.
Stocks traded down, but well off their lows of the day. The
Nasdaq finished off 75 to 2146, the
Dow Jones Industrial Average was 80 lower to 10,796 and the broader-market
S&P 500 Index lost 19 to 1249.
For the week ended April 28,
initial jobless claims were at their highest level since March 1996. There were 421,000 claims, compared to economists' forecasts for 390,000 new claims. Today's number bumps the four-week average up to 404,500.
One day before monthly data on employment -- arguably the
single best measure of the health of the economy -- the jobless figure put fear about rising unemployment back into the equity market. Recent data, such as the first-quarter
inspired hope about an economic recovery. But frailty in the labor market might dash that optimism.
Despite the weak numbers, some traders attributed today's losses to profit taking in the wake of the market's recent run up. "The bet is that we'll have an economic recovery in the fourth quarter," said Jim Volk, co-director of institutional trading at
. "So people who bought stocks early on are taking profits."
Instead of a downward spiral, Volk said, today's pullback is part of a mid-course correction. Ever since closing at a low of 9,389.48 on March 22, the Dow is up 16% as of yesterday's close, while the Nasdaq is 36% higher than its April 4 close of 1638.8. "The mentality is still to buy on the dips," he said, "rather than sell on any major losses."
The bond market rallied today, boosted by the jobless claims data and sagging stocks. The benchmark 10-year
Treasury note was earlier this afternoon up 18/32 to 98 11/32, dropping the yield to 5.215%. The 30-year bond was up 28/32 to 96 5/32, dropping its yield to 5.642%. Today's report raises optimism, among bond investors, about another aggressive rate cut when the Federal Reserve meets next on May 15.
By coffee break time in Silicon Valley,
Procter & Gamble
were the only Dow components trading above water. At the close, seven stocks were in the green.
Sectors hit particularly hard in today's trading included semiconductors, transportation companies and networkers.
As investors look for signs of a turnaround in bellwether tech companies, Goldman Sachs'
Rick Sherlund ventured this morning to cast his vote for the software industry. In a
note to investors, the analyst said software would be the sector that recovers first. "Software is not subject to the need to work down channel inventory levels and is sold more for current consumption, so business could potentially come back more quickly than in other sectors," he wrote.
Most software names were nevertheless lower, along with the general turn lower in the market.
finished off 3.7% to $69.47, while
slipped 4% to $45.99. These stocks are among the six software names Sherlund recommended in his report this morning.
Dow Jones U.S. Technology Software Index
closed off 2.9%.
Software names weren't the only companies on the losing end. Big-name tech from all areas of business took a hit.
, which surged 12% yesterday after a
Morgan Stanley Dean Witter
issued an upbeat note about the networking sector, retreated 6.7% to $18.66.
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