Stocks opened lower Thursday after a larger-than-expected rise in weekly jobless claims but pared losses following a better-than-expected reading on the services sector.
The service sector, which accounts for 80 percent of U.S. economic activity, contracted less than expected in March. The Institute for Supply Management said its nonmanufacturing index came in at 49.6, up slightly from 49.3 in February and just shy of the 50 mark, which would indicate expansion. Economists had expected a reading of 48.5, according to Reuters.
The number of U.S. workers applying for unemployment benefits last week jumped to 407,000, the highest reading since September 2005. Economists consider any reading over 400,000 to be recession territory but a Labor Department official said seasonal adjustments due to the early Easter holiday may have affected the reading. The four-week moving average rose to 374,500.
The weekly jobless data come a day after ADP Employer Services reported that 8,000 jobs were added to private-sector payrollsin March. On Friday, the Labor Department will issue its March employment report. The consensus is for nonfarm payrolls to have dropped by 60,000, following a 63,000 decline in February, and for the unemployment rate to tick up to 5 percent from 4.8 percent.
The banking sector will be in focus once again, with a Senate committee hearing on the bailout of Bear Stearns, featuring testimony from Federal Reserve Chairman Ben Bernanke, JPMorgan CEO Jamie Dimon and Bear Stearns CEO Alan Schwartz.
Shares of both Bear Stearns and JPMorgan were lower as the hearing continued.
The Federal Reserve has stationed itself inside brokerage firmsincluding Goldman Sachs and Bear Stearns -- something it hasn't done in a decade -- to monitor their financial condition, the Wall Street Journal reported. The move is tied to the Fed's decision to lend money to Wall Street.
Among other firms that will get in-house Fed monitors are: Morgan Stanley , Lehman Brothers , Merrill Lynch and JPMorgan Chase.
Judicial attempts to sort out the subprime mess continue, with legal battles still making headlines.
A federal judge has granted the U.S. Department of Justice wide authority to probe whether Countrywide Financial abused the bankruptcy process, rejecting the mortgage lender's claim that the ruling could cause havoc for the lending industry.
In Europe, London newspaperThe Times reported that rogue trader Jerome Kerviel had launched court proceedings against Societe Generale to contest his sacking for gross misconduct after he exceeded his trading limit, causing the bank 4.9 billion euros ($7.5 billion) in losses in January.
One of Kerviel's lawyers denied Kerviel had filed suit but declined to comment on the possibility that he would.
BlackBerry maker Research In Motion reported after the closing bell Wednesday that it earned 72 cents a share in the fiscal first quarter, topping the high end of its range -- and analysts' forecasts -- by two cents. The company added 2.18 million new subscribers, also the top end of analysts' range. The company projected earnings of 82 to 86 cents a share for the fiscal first quarter, well above analysts' forecast of 76 cents a share. BlackBerry shares rose.
Apple also advanced. Piper Jaffray online media analyst Gene Munster explained to the "Fast Money" crew on Wednesday night what the whole iPhone shortage buzz was about: a new iPhone. Munster said a new model that uses 3G technology -- crucial for global roaming -- could be out as early as the end of the month, according to a component supplier.
Meanwhile, Garmin shares skidded after the navigational-device maker issued a weaker-than-expected revenue forecast. Garmin said its first-quarter sales would be about 40 to 50 percent below the fourth quarter, which would put the range between $615 million and $738 million. Analysts expect revenue of $731.2 million, according to a Reuters survey.
Among the biggest tech decliners was industry bellwether Cisco Systems after UBS downgraded its rating on the stock to "neutral from "buy," citing concerns about slowing orders.
Micron Technology , the largest U.S. maker of flash-memory chips, reported its loss widened in the fiscal second quarter as revenue was hurt by the persistent slump in prices of memory chips, which are used in gadgets such as cellphones, digital cameras and music players.
As tech firms brace for slower U.S. spending, news emerged of more layoffs.
Meanwhile, Michael Dell said Dell Computer plans to cut more jobs than the 8,800 it had previously announced and that it has already eliminated 5,500 positions.
"We are not satisfied with the current state of affairs and are on a mission to fix it," Dell said. "Every area of the company is being pursued" for cost cuts.
And Google is said to be planning to lay off 20 percent of DoubleClick's global workforce, the New York Times reported.
THURSDAY: Senate hearings on JPMorgan/Bear Stearns deal
FRIDAY: Jobs report
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