US stocks close down
Stocks slumped on Wall Street today as upbeat labour market data was eclipsed by interest rate worries, lacklustre retail sales and a stern warning about the US budget deficit from Federal Reserve chairman Alan Greenspan.
Continuing a pattern, Wall Street fell on good economic news that it believed would motivate the Fed to raise rates.
The Labour Department reported that the number of people filing new claims for unemployment insurance fell last week to the lowest level since October 2000, a far greater decline than analysts had anticipated.
The drop added to the market’s suspense about the government’s monthly jobs report scheduled for release tomorrow.
“The unemployment claims are fuelling speculation that tomorrow’s numbers may be better than expected, so that raises the question about when the Fed will pull the trigger on rates,” said Peter Cardillo, chief strategist with SW Bach & Co. “So the bears have taken full control.”
The Dow Jones industrial average shed 69.69, or 0.7%, to 10,241.26, but was well off the lows of the session.
The broader gauges were also lower. The Nasdaq composite index dipped 19.52, or 1%, to 1,937.74. The Standard & Poor’s 500 index fell 7.57, or 0.7%, to 1,113.96.
Rising oil prices, apprehension over the US campaign in Iraq and the prospect of higher rates have overshadowed positive economic data and strong corporate earnings.
While Wall Street has assigned a great deal of significance to the expected hike, most analysts agree it will not have a lasting negative impact on stock prices or economic activity because rates currently stand at 46-year lows. Nonetheless, predictions that the Fed could take action as early as June have made the market jittery.
Contributing to investors’ anxiety, Greenspan told a banking conference today that the budget deficit could represent a major obstacle to long-term economic stability. The deficit will amount to 4.25% of the total economy after it climbs to an estimated 500 billion this year.
In addition, persistent unrest in the Middle East has heightened concern that terrorist acts could cause disruption in oil-producing countries. Oil is now trading at its highest level since the run-up to the Gulf War in 1990, and analysts say it could easily top 40 a barrel.
Wal-Mart lost 1.28 to 54.58 after it reported disappointing results.
Media giant News Corporation fell 88 cents to 36.50, despite reporting advertising gains at its Fox television division and Fox News Channel that helped it post a 69% jump in quarterly profits.
Sony lost 1.01 to 38.07 after the electronics and entertainment giant said it may post a group operating loss for the April-June quarter amid falling prices for the PlayStation 2 game console and promotion costs for the new Spider-man movie.
AT&T closed down 7 cents at 17.23 after announcing it was re-entering the wireless business just weeks after closing the 41 billion sale of its AT&T Wireless Services unit to Cingular Wireless.
Declining issues outnumbered advancers about 3 to 1 on the New York Stock Exchange, where volume was moderate.
The Russell 2000 index, which tracks smaller company stocks, was down 6.97, or 1.2%, at 563.09.
