Trigger-happy investors dumped U.S. stocks on Thursday, scared by the market's sudden fall through a key technical level brought on by more worries about Europe's debt troubles.
Unemployment benefit applications fell for the fourth time in 5 weeks, a sign hiring may improve. However I can't wait to see the first time claims once the temporary retail hiring season ends as the temp workers refile for unemployment. Then we'll see if there is really an improvement in hiring!
Mid-Atlantic manufacturing activity remained in expansion mode this month but just barely, according to a report released Thursday by the Federal Reserve Bank of Philadelphia; expectations for the future, however, surged.
Here are the top financial stories of the day:
1) Late Slide Hits Stocks Again-From The Wall Street Journal
Stocks fell Thursday in what market watchers described as a confluence of frayed nerves over Europe's sovereign debt, market technicals and fresh worries over Washington's debt negotiations.
The Dow Jones Industrial Average shed 134.86 points, or 1.1%, to 11770.73, the third loss in four days. All but two blue-chip components finished lower. The Standard & Poor's 500-stock index lost 20.76 points, or 1.7%, to 1216.15. The technology-oriented Nasdaq Composite dove 51.62 points, or 2%, to 2587.99.
Heavy afternoon selling in S&P 500 futures contracts pushed the broad stock index through key technical levels after a morning of small gains and losses. A Spanish government-bond auction ended with a euro-era high average yield just under 7%, and a Federal Reserve official warned that Europe's debt crisis could bite into U.S. economic growth. The lack of progress from Washington's deficit-cutting "supercommittee" also kept traders on edge.
"It doesn't take much to scare this market," said Uri Landesman, president of Manhattan-based Platinum Partners.
The selloff came despite more favorable U.S. jobs data, which showed that the number of people applying for new unemployment benefits in the U.S. last week fell to the lowest level since early April.
"It's a constant day-to-day, if not hour-by-hour, battle in our markets," said Randy Frederick, director of trading and derivatives at Charles Schwab. "[Stocks] want to go higher, but every time there is a hint of domestic optimism, you get this ugly news out of Europe."
European markets finished broadly lower, with the Stoxx Europe 600 shedding 1.3%. Besides the auction of 10-year Spanish government bonds, which produced a euro-era high average yield of 6.975%, French bonds also sold off.
Demand for 10-year U.S. Treasury bonds increased, with the yield falling 0.064 percentage point to 1.958%, driving the price up 19/32 to 100 12/32. Bond prices move inversely to their yields.
Oil futures slumped $3.77 a barrel, or 3.7% to $98.82. Gold lost $54 a troy ounce, or 3% to $1,719.80.
In corporate news, well-known value investor Bill Miller is stepping down from the Legg Mason Capital Management Value Trust mutual fund and will succeeded by Sam Peters, effective April 30, the asset manager said. Legg Mason's stock fell 2.8%.
On its first day of trading on the Nasdaq, consumer-review website Angie's List surged 25% from the initial public offering price of $13.
Shares of Sears Holdings slumped 4.6% after the department-store operator reported a wider-than-expected fiscal third-quarter loss. Revenue fell short of estimates, and margins narrowed.
Applied Materials lost 7.5% after the chip-equipment maker said first-quarter earnings and revenue would be below forecasts.
Elsewhere, Rambus bounced 23% after plunging 61% Wednesday following a jury's rejection of the chip maker's allegations in an antitrust case against Micron Technology and Hynix Semiconductor. Micron shed 6.1%.
In other economic data, a Commerce Department report showed U.S. home building fell less than expected in October, while a gauge of future construction surged, a sign the long-suffering housing sector might be stabilizing.
A third report by the Federal Reserve Bank of Philadelphia showed mid-Atlantic manufacturing activity remained in expansion mode this month, but just barely, while expectations for the future surged.
2) Unemployment aid applications drop to 7-month low-From AP
The number of people applying for unemployment benefits fell last week to the lowest level since early April, a sign that layoffs are easing and hiring may pick up.
Weekly applications dropped by 5,000 to a seasonally adjusted 388,000, the Labor Department said Thursday. It was the fourth decline in five weeks.
The four-week average, a less volatile measure, dropped to 396,750. That's the first time the average been below 400,000 in seven months.
Applications need to consistently drop below 375,000 to signal sustained job gains. They haven't been that low since February.
The job market "is still weak but there are hopeful signs of some modest improvement," Steven Wood, an economist at Insight Economics, in a note to clients.
The number of people receiving benefits also fell to the lowest level since Sept. 2008, when Lehman Brothers collapsed and the financial crisis intensified.
Some people may no longer be getting benefits because they've found jobs. But a larger number have likely used up all their benefits, Wood said.
The benefit rolls fell 57,000 to 3.6 million in the week ended Nov. 5. That's one week behind the applications data. The figure is the lowest since Sept. 20, 2008.
That doesn't include about 3 million additional people receiving extended benefits from emergency programs put in place during the recession. All told, 6.8 million people received benefits during the week ended Oct. 29, the latest data available.
The economy is growing but not quickly enough to generate many jobs. A series of reports this week shows manufacturers are producing more goods and consumers are spending more in retail stores.
Inflation may be peaking, too, largely because gas prices have fallen. That could help boost consumer spending, which fuels 70 percent of economic activity.
Stronger consumer spending this summer was a key reason the economy grew at an annual rate of 2.5 percent in the July-September quarter. Many economists forecast similar or slightly better growth for the October-December quarter.
The economy needs to grow at nearly double that rate — consistently — to make a significant dent in the unemployment rate, which has been near 9 percent for more than two years.
Economists worry that consumers can't sustain their spending growth from this summer without more jobs and higher pay. Consumers spent more in the third quarter while earning less. Many dipped into their savings to make up the difference.
A rebound in manufacturing could lead to more hiring. Factory output grew in October for the fourth straight month, the Federal Reserve said Wednesday. Production of trucks, electronics and business equipment all rose.
One concern is that Europe's debt crisis could worsen and trigger a recession. That could slow demand for U.S. exports and stunt job growth.
3) Philly Fed gauge shows slowing growth in November-From MarketWatch
A gauge of manufacturing activity in the Philadelphia region showed slowing growth in November, according to a key index released Thursday.
The Philadelphia Fed’s manufacturing survey in November slowed to a reading of 3.6 from 8.7 in October, below the 10.0 expected in a MarketWatch-compiled economist poll.
The survey’s indicators for activity, shipments, and new orders recorded positive readings this month, but all declined slightly from their October readings, the Philly Fed said.
The current employment index increased 11 points from its reading in October, another indicator of the improving jobs picture also represented by declining initial jobless claims.See related story about jobless claims.
The index, designed so that readings above zero indicate improving sentiment compared to the previous month, has been volatile this year, reaching as high as 43.4 in March but dropping to -30.7 in August.
A similar survey of New York area manufacturers released earlier in the week also showed faint growth in November. See story about Empire State index.
Harvey Mackay's Moral: The best way to sound like you know what you're talking about is to know what you're talking about.
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