Stocks Fall on Jobless Claims Report
Thursday, May 21, 2009; 4:19 PM
Stocks lost more ground today after a government report showed that the labor market remains weak despite initial signs the recession might be easing.
The Dow Jones industrial average, an index of 30 blue-chip stocks, fell 1.5 percent, or 130 points, while the broader Standard & Poor's 500-stock index lost 1.7 percent, or 15 points. The tech-heavy Nasdaq was down 1.9 percent, or 33 points.
Initial jobless claims fell by 12,000 last week to 631,000, according to the Labor Department. That was a higher total number of claims than analysts were expecting, and the overall level of claims remains high by historical standards.
"These latest numbers do not encourage the idea that the pace of layoffs is dropping sharply," Ian Shepherdson, chief U.S. economist for High Frequency Economics, said in a research note.
Wall Street is continuing a downtrend from yesterday when stocks were weighed down by a grimmer economic forecast from the Federal Reserve, which weighed on bank stocks. Investors have cheered better-than-expected economic reports during the past few months but have become cautious recently when those reports fell short.
Investors are also locking in profits after a more than 30 percent run up in prices since stocks hit a low point in early March, analysts said. "The market is understandably poised for a modest retrenchment since we have seen significant gains across the board," said Thomas Francis Nordby, a futures strategist for LaSalle Futures. "The rapid run-up we experienced should tell investors that the markets will continue to recover but at a more slow and steady pace."
Today, banking stocks continued to lag behind the rest of the market. General Electric and HSBC were down 3.5 percent and 2.2 percent, respectively. Bank of America gained ground yesterday after announcing it had raised $13.5 billion in a stock sale but was solidly negative today.
Crude oil prices were down about 1 percent to $61 a barrel on the New York Mercantile Exchange. Amid speculation that the worst of the worst of the recession might be over, oil prices had hit a six-month high after falling below $40 a barrel earlier this year.
Exxon Mobile and Chevron were down 1.8 percent and 1.1 percent, respectively, while ConocoPhillips fell 2.4 percent.
Also weighing on the market was Standard & Poor's lowering its outlook for the United Kingdom to negative from stable because of rising debt levels. "We have revised the outlook on the U.K. to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100% of GDP and remain near that level in the medium term," Standard & Poor's credit analyst David Beers said. "We base our opinion on our updated projections of general government deficits in 2009-2013. These projections reflect our more cautious view of how quickly the erosion in the government's revenue base may be repaired, the extent to which the growth in government spending can be curtailed, and consequently the pace at which historically high fiscal deficits are likely to narrow."
London's FTSE fell 2.8 percent today.
Other overseas markets were also down. Germany's DAX fell 2.7 percent, while Japan's Nikkei lost 0.9 percent.