Stocks slip as recovery worries return
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8/26/10Stocks slipped on Thursday, erasing earlier gains, as worries about a slowing economy overshadowed an upbeat report on jobless claims.
The Dow Jones industrial average slipped 69 points, or 0.7%, the Nasdaq composite fell 19 points, or 0.9%, and the S&P 500 ticked down 7 points, or 0.7%.
An earlier bounce lost steam as investors turned their focus to the economy, bracing for the latest reading on second-quarter gross domestic product due early Friday. GDP, the broadest gauge of economic activity, is expected to show the economy grew much less than previously estimated.
“When things are as bad as they are, any news like [today's] jobs data showing a slight improvement helps,” said Gary Webb, CEO at Webb Financial Group. “But we’re still in a mess, and I think it’s going to continue to be a rocky road for the market until we see some some gradual momentum.”
The three major indexes finished higher Wednesday after spending most of the session in the red following an unexpected plunge in new home sales.
Economic gloom continued to hang over investors Thursday, with losers outnumbering winners by nearly two-to-one on both the New York Stock Exchange and the Nasdaq. Declines were broad-based, with big names like Intel losing more than 1%, while winners included Boeing and First Solar.
Economy: The Labor Department said the number of people filing for first-time unemployment fell to 473,000 last week, which was lower than expected. Last week, stocks took a hit when the figure jumped dramatically to 500,000 initial claims.
Thursday’s better-than-expected jobs report wasn’t enough to calm jittery investors, especially with a closely-watched GDP reading on tap Friday. Economists expect the government to revise second-quarter GDP to 1.4%, a significant slowdown from the previous reading of 2.4%.
“We’re pretty much just waiting for the GDP number at this point, and everybody is anticipating a poor number,” said Ron Kiddoo, CIO at Cozad Asset Management. “If it comes in as expected, we may not see much movement since we seem to already be pricing that in, but if you have a number below 1%, the market could get really ugly.”
Companies: PC-maker Dell said data-storage company 3PAR has accepted its $1.6 billion takeover bid, sending shares of 3PAR down more than 2%.
Shares of Toyota slumped 1.5% after the automaker said it will recall more than 1 million Corolla and Corolla Matrix vehicles due to engine problems.
The Federal Aviation Administration proposed a $24 million fine against American Airlines. The airline said it will challenge the civil penalty, which would be the largest fine in FAA’s history. Shares of AMR Corp., which owns American Airlines, fell nearly 1%.
World markets: European shares rallied. The CAC 40 in France ended 0.7% higher, Britain’s FTSE 100 climbed 0.9% and the DAX in Germany added 0.2%.
Asian markets ended mixed. Japan’s benchmark Nikkei index increased 0.7%, and the Shanghai Composite edged up 0.3%. The Hang Seng in Hong Kong lost 0.1%.
Currencies and commodities: The dollar fell against the euro and the British pound but rose versus the Japanese yen.
Oil futures for October delivery rose 85 cents to $73.37 a barrel. Gold for December delivery fell $3.60 to settle at $1,237.70 an ounce.
Bonds: The yield on the 10-year Treasury note slipped to 2.53 from 2.54% late Wednesday.
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