Stocks Fall on Manufacturing Weakness

An unexpected skid in the Philadelphia Fed's February survey fanned recession fears Thursday

Stocks closed lower Thursday as weaker-than-expected reports on Philadelphia-area manufacturing and the Conference Board's gauge of leading economic indicators stoked worries the economy may be falling into a recession. Investors also weighed reports on first-time unemployment filings and leading economic indicators. Bonds surged in a rebound from Wednesday's slide. Gold and platinum futures hit record highs, while crude oil moved below the $100 mark.

On Thursday, the Dow Jones industrial average finished lower by 142.96 points, or 1.15%, at 12,284.30. The broader S&P 500 index fell 17.50 points, or 1.29%, to 1,342.53. The tech-heavy Nasdaq composite index shed 27.32 points, or 1.17%, to 2,299.78.

Activity in the broader market was negative on Thursday. On the New York Stock Exchange, 23 shares declined in price for every eight that advanced. Nasdaq breadth was 20-9 negative.

"The stock market is having a tough time getting into gear and has been drifting sideways in an ever constricting range," says S&P chief technical strategist Mark Arbeter. "Rallies and declines fail, as there seems to be little conviction either way."

Investors eyed a closely watched gauge of the labor market Thursday. U.S. initial jobless claims fell 9,000 to 349,000 in the week ended February 16. The prior week's 348,000 level was revised up to 358,000. This brought the 4-week moving average up to 360,500 from 349,750, reports Action Economics, representing a new multi-year high. Though the average reflects erosion in the labor market, says Action, the levels still aren't recessionary. Continuing claims rose another 48,000 to 2,784,000 from a revised 2,736,000 (previously 2,761,000).

The Philadelphia Fed index of manufacturing conditions fell to -24.0 in February, the

lowest reading since February, 2001, after falling 19 points to -20.9 the month before. Markets expected the index to improve to -12. The employment index rose to 2.5 from -1.5, while new orders improved to -10.9 from -15.2. Shipments fell to -12.2 from -2.3, while unfilled orders dropped to -10.9 from -6.2. Prices paid edged down to 46.6 after rising 13 points to 49.8 the month before, while prices

received fell to 24.3 following a near 17 point jump to 32.0 previously.

U.S. leading indicators fell 0.1% in January to 135.8, from a revised -0.1% in December (-0.2% previously) and the fourth consecutive monthly decline. Four of the 10 indicators were in negative territory, led by stock price weakness and building permits.

While in line with expectations, the continued weakness in the leading indicators will add to investors' slowdown fears, says S&P Economics.

With Thursday’s reports on the books, the market’s focus will switch to next week’s events, including congressional testimony from Fed chairman Ben Bernanke, and reports on the producer price index, durable goods orders, new home sales, gross domestic product, and personal income.

April NYMEX crude futures fell $1.47 to $98.23 per barrel Thursday following a weekly Energy Dept. inventory report that showed crude oil stocks rose 4.2 million barrels.

Comex April gold futures rose $11.40 to $949.20 Thursday as some traders sought to hedge against inflation. There's speculation gold will push to $1,000 soon as some see the yellow metal underpriced when adjusted for inflation, says S&P MarketScope.

Among Thursday’s stocks in the news, J.C. Penney (JCP) posted better-than-expected fourth quarter earnings per share of $1.93, vs. $2.09 one year earlier, on a 2.3% same-store sales drop and a 4.1% total sales decline. The company sees EPS of 75-80 cents for the first quarter and $3.75-$4.00 for all of fiscal 2009.

Research In Motion (RIMM) expects net subscriber account additions for the fourth quarter to be about 15%-20% higher than the 1.82 million net subscriber account additions it forecasted on Dec. 20. The total BlackBerry subscriber account base is expected to be approximately 14 million at the end of the quarter.