Jobless rise sends US stocks down
An unexpected rise in jobless claims unnerved Wall Street today, sending stocks sharply lower on worries the market’s recent rally might have come too far, too fast.
Yahoo! earnings, which met, but did not beat, estimates, also disappointed investors.
“Yahoo didn’t deliver significant upside, and it’s a huge momentum name, so you have some momentum taken out of the market,” said Keith Keenan, vice president of institutional trading at Wall Street Access, a New York-based brokerage firm. “The bulls anticipated much higher numbers.”
The Dow closed down 120.17, or 1.3%, at 9,036.04, having lost 66 points on Wednesday. It was the sharpest point drop since June 23, when the blue chips closed 127.80 points lower.
The broader market also declined. The Nasdaq composite index dropped 31.77, or 1.8%, to 1,715.69. The Standard & Poor’s 500 index fell 13.54, or 1.4%, to 988.67.
Yahoo slid 2.73, or 7.7%, to 32.56 after the Internet company reported quarterly profit doubled. The result was in line with forecasts, but First Albany lowered the company’s stock rating to “neutral” from “buy,” citing in part possible overvaluation.
The Labour Department reported today that new jobless claims rose last week by a seasonally adjusted 5,000 to 439,000, the highest level since the week ending May 31. Economists had been expecting a decline in claims.
Comments from Federal Reserve Chairman Alan Greenspan that high natural gas prices might not be alleviated soon also appeared to pressure shares.
Greenspan said the high prices would probably cause some industries to lose business to foreign competitors, but added that the overall economic impact was unclear.
Stocks have surged in recent months as investors grow increasingly upbeat about a solid economic recovery by year’s end. But analysts say investors now want to see more concrete evidence of improvement, particularly in the tech sector, which has seen strong gains.
But analysts described today’s declines as more of a natural pullback. On Tuesday, the Nasdaq composite reached a near 15-month high, while the Dow and S&P traded at levels not seen in a year.
Abbott Laboratories fell 13 cents to 43.55 after the company posted operating profits that were in line with previous estimates.
Several retailers also took a hit following reports of tepid June sales. Wal-Mart slipped 13 cents to 55.63 after posting a small sales gain that fell below estimates, while American Eagle Outfitters dropped 40 cents to 19.25.
And Coinstar tumbled 5.59, or 29.5%, to 13.35 after the provider of self-service coin processing said it could not reach a new agreement with grocery store chain Safeway Inc., prompting it to lower its year-long outlook.
Gainers included PepsiCo, which rose 2.40 to 46.95, after the food and beverage giant reported a rise in quarterly profit that met analysts’ expectations.
Declining issues outnumbered advancers nearly 3 to 1 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, a barometer of smaller company stocks, fell 7.96, or 1.7%, to 469.03.
Elsewhere, Japan’s Nikkei stock average finished 0.4% lower today. In Europe, France’s CAC-40 declined 1.3%, the FTSE 100 dropped 0.6% and Germany’s DAX index fell 1.6%
