Stocks Slump; Health Care Falls; Microsoft Up
Stocks traded mixed after further evidence the U.S. economy has hit a soft patch, and amid continuing concerns about whether Greece will be able to restructure its debt.
The Dow Jones Industrial Average fell more than 30 points after snapping a three-day losing streakwith a modest rise on Wednesday.
Most Dow components slumped, led by Merck , but Microsoft gained in the wake of reports that David Einhorn, the hedge fund mangaer, is calling for CEO Steve Ballmer to resign.
TheS&P 500 fell slightly, while the tech-heavy Nasdaq rose slightly. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 17.
Among key S&P 500 sectors, health care and utilities fell, while technology rose.
News on the economic fronton Thursday pointed to continued economic weakness in the U.S. Investors had hoped initial claims for unemployment would fall, indicating the jobs market was picking up, but claims rose, and the second reading of first quarter economic growth didn't improve as expected. GDP remained at a sluggish 1.8 percent.
The economic headwinds, combined with the uncertainty surrounding how the economy will repond to the end of the Federal Reserve's bond buying program, could send stocks tumbling more in the weeks ahead. While David Katz, senior portfolio strategist at Weiser Capital Management, doesn't expect the market to reflect recessionary levels, he does expect a downdraft. And that downdraft will present buying opportunities, Katz said.
"Cash that's on the sideline waiting for the next dip will be put to work" he said.
Most of Weiser Capital Management's clients have 5 to 20-percent cash at any point, Katz said. The firm was buying bigger tranches when the market tumbled in late 2008 through 2009, and they are "taking much smaller chunks now," he said. "I think we will have an opportunity to take healtheir bites in the coming quarters."
The euro rose against the dollar Thursday after news China may buy “bailout bonds” for Portugal although concerns about the future of Greece's restructuring efforts continued to worry investors. Meanwhile, Maria Damanaki of Greece, and head of Fisheries at the European Commission, said Greece may be forced out of the euroif it can't accomplish tough austerity measures.
In Deauville, France, the G8 gets underway. Leaders arrived on Thursday morning for the first meeting following the spring uprisings in Arab countries, and the earthquake, tsunami and nuclear disaster in Japan.
In one of their first actions, leaders called on Yemen's president to step downto avoid a civil war.
Sony fell slightly after reporting a jump in net losses from a write-off, but the tech manufacturer forecast a profit for its current financial year. The company's earnings continue to be affected by the March earthquake and tsunami in Japan as well as cyber attacks of its PlayStation Network.
Tiffany , meanwhile, soared to the top of the S&P 500 after reporting higher profits in every region and raised its forecast for the full year. Global sales rose 20 from the first quarter, better than the luxury jewelry retailer's initial forecast.
Meanwhile Heinz rose slightly after reporting higher than expected sales for the quarter ended April 27, although profits for the maker of ketchup and other food products, missed by a penny.
On the initial public offering front, shares of FreeScale Semiconductor Holdings jumped after the semiconductor company began trading Thursday morning. The offering was priced Wednesday at $18 a share, below the initial price talk of $22 to $24 a share.
But Spirit Airlines , fell after shares of the ultra low-priced airlines began trading. The $15.6 million IPO was priced at $12 a share on Wednesday.
The weak economic news pushed oil prices slightly lower, but U.S. light, sweet crude still traded above $101 a barrel, while in London, Brentcrude fell slightly below $115.
On the economic front, jobless claims rose 10,000 last week to a seasonally adjusted 424,000 form an upwardly revised 414,000, the Labor Department reported. The four week average of claims, however, fell to 438,500. Economists surveyed by Reuters had expected claims last week would fall to 400,000.
Also, the second reading on first quarter gross domestic product was reported unchanged at 1.8 percent. The GDP Price Index was also unchanged at 3.8 percent, and the GDP Deflator was unchanged at 1.8 percent. Economists had expected the second reading would show slightly stronger growth.
And sales of homes owned by banks or in some stage of foreclosure fell in the first quarter as demand remained weak, but distressed homesstill made up about 28 percent of sales, RealtyTrac reported on Thursday.
In other economic news, Goldman Sachs reduced its earnings forecast for the S&P 500 to $104 a share from $106, bringing its forecast for the index to 1,450.
European stocks rose as mining stocks lifted the benchmark index in the London market.
On Tap This Week:
THURSDAY: Seven-year Treasury note auction, money supply.
FRIDAY: Personal income and spending, consumer sentiment, and pending home sales.
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