- The Washington Times - Thursday, February 4, 2010

NEW YORK (AP) — Stocks tumbled Thursday after disappointing jobless claims numbers had investors worrying about the government’s upcoming January jobs report.

At the same time, more trouble for debt-strapped European governments also unnerved investors and sent them in search of safe haven holdings like the dollar and Treasurys. The Dow Jones industrial average fell 200 points, and all the major indexes were down about 2 percent.

The day’s news reminded investors that the global economic recovery remains tenuous and also raised questions about whether the market can resume its rebound from the 12-year lows it hit last March. Investors were concerned Thursday that a weakening of foreign economies could spill over to the U.S. and put more pressure on the job market, which is seen as the biggest obstacle to the nation’s recovery.

Claims for unemployment benefits rose by 8,000 to 480,000 last week, the Labor Department reported, disappointing investors who had hoped for a drop. It was the fourth increase in the past five weeks. The number of lost jobs was the highest in two months and upended a sense that claims would resume a decline that occurred in the fall and early winter.

The report chilled expectations that the government’s January jobs report, due Friday, would show that employers added workers in the first month of the year. Analysts currently expect Friday report to show that employers added 5,000 jobs in January, but also that the unemployment rate ticked up to 10.1 percent from 10 percent.

U.S. trading also was affected by European markets, which tumbled on concerns about onerous debt levels in countries including Greece, Spain and Portugal. The euro hit a seven-month low against the dollar. That hurt demand for commodities, which are priced in dollars and become more expensive to foreign buyers when the dollar climbs.

The concern about jobs and finances in Europe overshadowed improvements in worker productivity and an increase in factory orders.

The bad news on employment and European government debt overshadowed pockets of better than expected sales reports from some U.S. retailers. Macy’s Inc. raised its profit forecast after sales rose and it discounted fewer items.

Manny Weintraub, president of Integre Advisors in New York, said the economy won’t be able to recover and the stock market won’t be able to extend its 11-month run if consumers don’t eventually start ratcheting up spending. Improvements in unemployment would boost confidence of job seekers and could make those with jobs feel more at ease.

“That’s the whole story. People feel if employment starts to improve you have a big multiplier effect,” Weintraub said.

In midday, the Dow fell 201.26, or 2 percent, to 10,069.29. The day’s slide erased most of the market’s gains from the first two days of the week and put the psychological barrier of 10,000 back on investors’ radar. The Dow hasn’t fallen below 10,000 since Nov. 6.

The broader Standard & Poor’s 500 index fell 24.51, or 2.2 percent, to 1,072.77, while the Nasdaq composite index slid 47.17, or 2.2 percent, to 2,143.74.

Stocks posted modest losses Wednesday, halting a two-day rally after the Institute for Supply Management, a trade group, said activity in services industries grew less than expected last month.

In other trading, bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.62 percent from 3.71 percent late Wednesday.

The Chicago Board Options Exchange’s Volatility Index jumped 13 percent. An increase in the VIX, which is known as the market’s fear gauge, is a sign that investors predict more big moves in stocks.

Demand for safety jumped as investors worried that Portgual, Spain and Greece will have trouble containing rising debt loads.

Traders remained skeptical about Greece’s plan to slash its budget deficit from 12.7 percent of the nation’s gross domestic product in 2009 to less than 3 percent in 2012. Meanwhile, Portugal on Wednesday cut a planned treasury bill issue while Spain said its deficits will be more than anticipated in the coming three years.

There was good news for the U.S. economy. William Dudley, president of the Federal Reserve Bank of New York, said in an interview with The Associated Press that while he is concerned about the weakness in the U.S. recovery he doesn’t expect the economy will fall back into recession.

“I think we do have a sustainable economic recovery,” Dudley said, adding that he less confident about the strength of the rebound.

The rise in the dollar hit commodity prices and stocks of companies that produce them. Crude oil fell $3.64 to $73.34 per barrel on the New York Mercantile Exchange.

Aluminum producer Alcoa Inc. fell 50 cents, or 3.7 percent, to $12.99, while Freeport-McMoRan Copper & Gold Inc. fell $3.29, or 4.7 percent, to $67.17.

Eight stocks fell for every one that rose on the New York Stock Exchange, where volume came to 541.9 million shares, compared with 429.7 million traded at the same point Wednesday.

The Russell 2000 index of smaller companies fell 13.13, or 2.2 percent, to 597.53.

Britain’s FTSE 100 dropped 2.2 percent, Germany’s DAX index slid 2.5 percent, and France’s CAC-40 lost 2.8 percent. Japan’s Nikkei stock average fell 0.5 percent.

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