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Stocks drop as jobless claims rise
NEW YORK (AP) — Stocks tumbled Thursday after two disappointing economic reports renewed investors’ concerns about the pace of the recovery.
The Dow Jones industrial average fell 144 points. All the major stock indexes fell more than 1 percent. Interest rates also fell sharply as investors moved back into the safety of Treasury bonds.
The Labor Department said initial claims for unemployment benefits rose unexpectedly last week and the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region has dropped during August.
“The Philly Fed number was just awful,” said Randy Frederick, director of trading and derivatives at Charles Schwab. “The jobs number was bad, but not as far off the mark as the Philly number.”
The reports are the latest in a months-long string of conflicting readings on the economy. The reports have shown the pace of a rebound is slowing and that companies are skittish about adding new workers. That has hurt stocks on some days in recent weeks. It has also raised fears about the economy falling back into recession.
At the same time, corporate announcements, including earnings reports for the past six weeks, have largely showed companies are doing well. There has also been a spate of acquisitions announced. Mergers and acquisitions activity is often considered a positive sign because it means companies are willing to expand their businesses and are confident their prospects are improving.
The Dow fell 144.33, or 1.4 percent, to 10,271.21. All the 30 Dow stocks fell, only the ninth time that has happened this year.
The Standard & Poor’s 500 index fell 18.53, or 1.7 percent, to 1,075.63, while the Nasdaq composite index fell 36.75, or 1.7 percent, to 2,178.95.
About four stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 4.4 billion shares, up from Wednesday’s 3.8 billion.
Volume has been particularly light in recent weeks, even by summer standards. Many traders are on vacation, but others are so uncertain about the direction of the economy that they’re staying away from any big moves.
Bond prices rose after the weak jobs and manufacturing reports. Investors often move into the safety of government bonds when there are signs the economy is not strong. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.58 percent from 2.64 percent late Wednesday. Its yield is often used to help set interest rates on mortgages and other consumer loans.
Joe Benanti, managing director at Rosenblatt Securities, said low volume likely added to the sell-off.
It’s “probably taking trading a little to an extreme, more than it should,” Benanti said.
The Labor Department said initial claims for unemployment benefits rose by 12,000 to 500,000 last week from an upwardly revised 488,000 a week earlier. Economists polled by Thomson Reuters forecast claims would fall slightly. It was the fourth rise in claims in the past five weeks and sent them to their highest level since November.
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