Stocks End Lower After Late Selling
Stocks ended lower Thursday as late selling and nagging weakness in the bond market helped deflate a rally fueled by a surprising drop in weekly unemployment claims.
The Dow Jones industrial average climbed as much as 87 points after the government reported that first-time unemployment claims fell below 400,000 for the first time since February.
But the market lost momentum and turned lower in afternoon trading. Analysts said short-term traders in particular were concerned that the market might have climbed too high.
“Considering that we had a 25% move in the market in the last few months, the fact that we’re seeing a little profit-taking is not only expected, it’s healthy,” said Tim Smalls, a trader at SG Cowen Securities.
The Dow closed down 81.73 points, or 0.9%, at 9,112.51. The tech-laden Nasdaq composite index declined 17.76 points, or 1%, to 1,701.42 and the Standard & Poor’s 500 index fell 7.01 points, or 0.7%, to 981.60.
Losers led winners by slim margins on Nasdaq and the New York Stock Exchange in active trading.
Stock traders said a technical indicator used by some market players to forecast possible market turns prompted a sell-off when the indicator hit a low for the day of 19.63 -- a low not seen since April 2002.
Steep declines in the indicator, the Chicago Board Options Exchange’s market volatility index, to 20 or below are said to suggest an overly optimistic market susceptible to setbacks.
The Labor Department said new unemployment claims dropped by a seasonally adjusted 29,000 to 386,000, the lowest level in five months. It also was the first time since February that initial unemployment claims had fallen below 400,000, a level associated with a weak job market. Analysts had expected a slight rise in claims.
“The unemployment claims [report] certainly helped,” said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. “If you don’t get stabilization in the jobs market, then obviously the question is how strong the recovery will be.”
Stock trading has been choppy in recent weeks as investors have waded through the second-quarter earnings season. Analysts say investors want to see proof of a solid economic recovery, having sent stocks surging since mid-March.
Decliners included Raytheon, which fell $1.24 to $32.32, after the defense contractor reported a decline in operating earnings. Its results nonetheless beat analysts’ estimates. The company also increased its sales forecast but left its earnings forecast unchanged.
SBC Communications lost 67 cents to $23.30 after the local-telephone company posted a drop in profit; the results still beat estimates by a penny.
But AT&T; advanced 47 cents to $20 after the nation’s largest long-distance telephone company reported quarterly earnings that handily beat expectations. The company also said it planned to raise its dividend to 23.75 cents from 18.75 cents. And American International Group rose $1.95 to $62.20 after the insurer reported earnings that were higher than Wall Street’s estimates.
Longer-term bond yields climbed on the unemployment claims report. The yield on the benchmark 10-year Treasury note rose to 4.16% from Wednesday’s close of 4.11%.
In other highlights:
* Oil prices rose back above $30, supported by a government report showing a fresh decline in already tight U.S. fuel stocks. Crude for September delivery rose 55 cents to $30.22 a barrel in New York trading.
* Computer Associates surged $2.98, or 13%, to $25.22, after the software maker reported earnings that beat estimates by 5 cents a share. It was the company’s first profit in more than two years.
* Two initial public offerings began trading Thursday. Redwood City, Calif.-based software maker IPass rose $4.67 to $18.67, a 33% gain over its offering price. Integrated Alarm Services Group, an Albany, N.Y.-based company that installs alarm systems, closed at $9.43, up slightly from its offering price of $9.25.
