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Stocks lower as economic woes mount
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NEW YORK (AP) – Wall Street recoiled again Thursday, sending stocks lower for a second straight day as new readings on retail sales and jobless claims fanned investors' worries that the economy is in recession.
New claims for unemployment benefits did dip by 4,000 to a seasonally adjusted level of 481,000, according to the Labor Department. But jobless claims above 400,000 are considered recessionary levels, and have run above that figure for 16 weeks. Also, long-term claims jumped to 3.84 million, the highest level in 25 years. The numbers arrive a day ahead of the key October jobs report, a widely watched barometer of the economy's health.
Meanwhile, retailers are releasing October sales figures that indicate consumers are pulling back their spending sharply. Wal-Mart Stores Inc. reported a better-than-expected 2.4 percent rise in October sales at stores open for at least a year, but investors are worried about other specialty retailers; Limited Brands Inc. and Gap Inc., for example, posted worse-than-expected sales drops.
Related story: Economy won't wait for Obama swearing in
In the first hour of trading, the Dow Jones industrial average fell 119.55, or 1.31 percent, to 9,109.72.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 14.58, or 1.53 percent, to 938.19, and the Nasdaq composite index fell 30.37, or 1.81 percent, to 1,651.27.
Stocks appeared to draw some support following interest rate cuts by central banks in Europe. The Bank of England slashed its key interest rate by a bold 1.5 percentage points Thursday; the Swiss Central Bank cut its own key rate by a surprising half-point; and the European Central Bank lowered its key rate by a half-point.
On Wednesday, Wall Street plunged as investors considered once again how deep and protracted a U.S. recession President-elect Barack Obama will face in January when he is sworn in. After a string of huge gains in stocks, jitters returned to the market, driving the Dow down nearly 500 points. All three major indexes dropped more than 5 percent.
A late Wednesday warning by Cisco Systems Inc. added to investors' nervousness and weighed on the technology-heavy Nasdaq. The world's largest maker of computer networking gear said orders fell off sharply last month, suggesting to the market that the weak economy and tight credit markets are taking a larger-than-expected toll on many companies. Cisco fell 49 cents, or 2.8 percent, to $16.90.
And in other troubling corporate news, Japanese automaker Toyota Motor Corp. reduced its annual earnings forecast Thursday to less than a third of what it was in previous fiscal year. Toyota tumbled $11.50, or 14.3 percent, to $68.87.
The dollar traded mixed against most other major currencies, while gold prices turned higher.
Light, sweet crude fell $2.39 to $62.91 a barrel on the New York Mercantile Exchange.
Bank-to-bank lending rates fell for the 19th straight day, a sign that banks are becoming more willing to lend. The London Interbank Offered Rate, or Libor, for three-month dollar loans dipped to 2.39 percent from 2.51 percent.
The three-month Treasury bill, considered the ultimate safe asset, saw its yield dip further to 0.38 percent from 0.42 percent late Wednesday. In general, a lower yield means higher demand, but it is also affected by the federal funds rate. ___
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
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