Investors Thursday weighed reports showing a jump in weekly initial jobless claims and a surprising widening of the U.S. trade deficit
U.S. stocks fell Thursday as the market consolidated recent gains amid some disappointing economic data. Some traders continued to look for confirmation that the stock market has reached bottom.
Reports that weekly U.S. initial jobless claims rose 58,000 to 573,000, the October trade deficit surprisingly rose to $57.19 billion from $56.56 billion, and import prices plunged 6.7% were all signs that the recession is steepening, and could be more extensive than many anticipated, according to S&P MarketScope.
Also Thursday, Congress battled over a loan package to aid troubled U.S. automakers; President-elect Barack Obama urged action on the plan. Shares of automobile manufacturers dropped almost 9%.
Bonds were higher after the Treasury Dept.'s auction Thursday of $16 billion in 10-year notes was met with good demand. Gold futures and oil futures moved high as the U.S. dollar weakened.
On Thursday, the Dow Jones industrial average lost 196.33 points, or 2.24%, to 8,565.09. The broad S&P 500 index shed 25.65 points, or 2.85%, to 873.59. The tech-heavy Nasdaq composite index dropped 57.6 points, or 3.68%, to 1,507.88.
European equities ended mixed, with London stocks up 0.49%, while Paris fell 0.43% and Frankfurt slipped 0.78%. Asian markets finished mixed, with Tokyo stocks rising 0.70%, Hong Kong up 0.23%, and Shanghai lower by 2.28%.
In economic news Thursday, U.S. jobless claims rose 58,000 to 573,000 in the week ended December 6 from a revised 515,000 the week before (509,000 previously). The 4-week moving average continued to climb higher, rising to 540,500 from 526,250, a fourth straight week above the 500,000 mark. Continuing claims rose 89,000 to 4,429,000 in the week ended November 29.
"Initial claims levels remain very ugly and in recessionary territory," says Action Economics.
The U.S. trade deficit widened to $57.2 billion in October after coming in to $56.6 billion in September (revised from $56.6 billion). Excluding petroleum, the deficit was virtually unchanged at $24.5 billion. Imports fell 1.3% and exports were down 2.2% as the global recession cut demand around the world. The deficit with China widened slightly to $27.96 billion.
U.S. import prices plunged 6.7% in November. Export prices dropped 3.2%. The 4.7% decline in import prices in October was revised to -5.4%. October's 1.9% decline in export prices was revised to -2.0%. On a year-over-year basis, import prices are now down 4.4% vs. a 6.7% growth rate previously; export prices are down 0.2% after a 4.2% increase previously.
Reports on the producer price index (PPI) and retail sales for November due out Friday will likely fan recession fears, says S&P MarketScope.
President-elect Barack Obama on Thursday unveiled former Senate leader Tom Daschle as his health secretary, and tasked him with steering an overhaul of the U.S. health system through a new
White House office. Daschle called health reform "our largest domestic policy challenge." Obama spoke about a wider range of issues during his press conference, saying he hoped a bailout of the U.S. auto industry could pass this week. He also addressed the scandal involving Illinois Gov. Rod Blagojevich. While answering questions, he repeated that he had no contact with the
governor's office nor did his office speak with Blagojevich about any deal-making over the appointment of his replacement in the Senate. That would be "a violation of everything this campaign is about," Obama said.
Among major U.S. companies issuing profit outlooks Thursday, Procter & Gamble (PG) said it expects to grow organic sales for the second quarter, but below the 4%-6% growth range estimated previously; P&G cited reductions in retailer, distributor, and consumers' in-home inventories in both developed and developing markets. The compoany continues to expect second-quarter EPS of $1.58-$1.63 and fiscal 2009 EPS of $4.28-$4.38.
Eli Lilly & CO. (LLY) reiterated its 2008 pro forma non-GAAP EPS guidance of $3.97- $4.02 (excluding the Imclone acquisition), and sees $4.35-$4.55 2009 non-GAAP EPS (excluding Imclone). Lilly plans to reduce the cost of bringing new medicine to market from $1.2 billion to $800 milion by 2010.
Stanley Works (SWK) said that due to severe weakness in the global economy, it has experienced rapidly deteriorating business conditions in its Construction/DIY and Industrial units. The company notes the sudden strengthening of the U.S. dollar against major currencies has exerted additional pressure on fourth-quarter EPS. Stanley now sees 2008 EPS from continuing operations of $3.30-$3.40 (excluding charges). It plans to cut 2,000 jobs, or 10% of its workforce, close three factories, and eliminate some layers of management; Stanley will incur an $80 million fourth-quarter charge related to the action. The company said economic conditions remain too volatile to issue a 2009 outlook.
Cummins Inc. (CMI) said it revised its outlook for 2008 due to the continuing decline in many of its key markets around the world. It now expects 2008 sales to increase by 9% over 2007, compared to its previous guidance of a 12% increase. The company said its earnings before interest and taxes (EBIT) is forecast to be slightly more than 9% of sales, compared to its earlier guidance of 10%.
Boeing Co. (BA) moves the 787 Dreamliner jet's first flight into the second quarter of 2009, and the first delivery into the first quarter of 2010, reflecting the impact of disruption caused by the recent Machinists' strike along with requirement to replace certain fasteners in early production airplanes.
In other U.S. markets Thursday, the 10-year Treasury note 27/32 to 109-01/32 for a yield of 2.69%, while the 30-year bond climbed 24/32 to 127-29/32 for a yield of 3.06%.
January West Texas Intermediate crude oil futures were up $3.67 to $47.19 per barrel after OPEC President Chakib Khelil said the cartel should agree on a more "severe" reduction in output at
the meeting next week in Algeria.
February gold futures were higher at $819.40 per ounce.