Stocks turned lower Thursday as commodities sank and following mixed news on the economy a day after the market suffered its biggest losses since last August.
The Dow Jones Industrial Average fell more than 65 points after plunging more than 2 percent on Wednesdayin the wake of dismal economic news and a Moody's downgrade of Greece's debt deeper into junk status.
Most Dow components fell, led by Chevron .
The S&P 500 fell more than 5 points, breaking through 1,310, a recent support level. The tech-heavy Nasdaq fell after holding slight gains most of the morning. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 18.
Most key S&P sectors fell, led by consumerstaples and energy.
The market tried to find its footing Thursday after a sharp selloff Wednesday triggered by news of unexpected weakness in the manufacturing sector and a smaller-than-expected gain in private payrolls, and compounded Moody's downgrade of Greece's debt deeper into junk status.
Further signs of weakness emerged Thursday as jobless claims fell less than expected, and retailers offered a mixed report on May same-store sales. But most investors were awaiting the May's jobs report on the government due Friday for a clearer picture of the economy's health.
"Leading into the unemployment data tomorrow, investors are very concerned the numbers are going to be worse than expected," said Jonathan Corpina, senior managing partner, Meridian Equity Partners. "I think the bar is set really, really low for tomorrow."
Volume on Thursday was light, which Corpina said will add to volatility for the rest of the session. Unless some news emerges that prompts investors to buy, he said, "the people who didn't sell out yesterday will continue to sell out today."
While investors have been jittery in the first two days of June, the weakness evident in the latest series of economic reports is consistent with a choppy recovery, said Nicholas Colas, chief market strategist at BNY ConvergEx Group. The choppiness shouldn't be a surprise, and it doesn't mean the economy won't turn around later this year, Colas added.
"We’re going to get periods of slowdown but it doesn’t mean we roll over and die," he said.
Colas is expecting May nonfarm payrolls will be in line with Thomson Reuters consenus estimates of a 150,000 gain.
"I don’t think it’s going to be a disaster," he said, noting that U.S. Treasury tax withholding is up about 15 percent, adjusting for the rollback granted by Congress late last year. That's the biggest gain in withholding since January 2008, Colas said.
Among stocks, retailers mostly slumped after posting a mixed bag of monthly sales figures as consumers struggled with higher prices for gasoline.
Costco's same-store sales in May beat estimates thanks to higher gas prices, rising 13 percent, while BJ's Wholesale also did better than expected. But Limited Brands, owner of Victoria's Secret, Gap, Target and TJX all missed.
Overall, analysts expect the rate of growth for U.S. chain stores sales will slow to a 5.4 percent gain compared with a gain of 8.9 percent in April, according to Thomson Reuters. Last May, sales rose only 2.6 percent.
Financials stocks were largely higher despite a spate of bad news Thursday. Goldman Sachs was off the lows of the session that were reached after news the investment firm received a subpoena from New York State.
And Moody's placed Bank of America , Citigroup and Wells Fargoon review for possible downgrade. The banks had benefited from monetary stimulus during the financial crisis and the review will show whether the removal of that support will require an adjustment.
Chinese hackers were suspected of trying to steal passwordsfrom hundreds of Google email accounts, including senior U.S. government officials, Chinese activists and journalists, the Internet company said. China's Foreign Ministry denied the accusations.
U.S. officials softened rules that could have cut off tuition aid to some programs run by for-profit colleges. Corinthian Colleges and Apollo Group jumped in premarket trading.
Starbucks was among stocks in focus after it said it had signed an agreement with its joint venture partner in South China, Maxim’s Caterers. that gives the chain full control of more than half of its retail stores in mainland China, Reuters said.
The dollar slipped against a basket of currencies on the mixed U.S. economic news. Oil prices traded slipped. U.S. light, sweet crude fell below $100 a barrel, while in London, Brent crude fell to nearly $114 a barrel.
On the U.S. economic front, initial claims for unemploymentfell 6,000 to 422,000, the Labor Department reported. Economists surveyed by Reuters had expected claims to fall to 415,000. The four-week average of claims fell to 425,000. Job growth occurs when jobless claims are below 375,000, economists say.
U.S. nonfarm productivity grew at a 1.8 percent annual rate in the first quarter, slightly more than previously estimated, while labor costs only increased by 0.7 percent, the Labor Department said. Productivity had previously been reported as growing at a 1.6 percent rate.
And factory orders slipped 1.2 percent in April amid a slide in demand for vehicles, machinery, metals, and other big-ticket items, the Commerce Department reported. The decline was the biggest in almost a year. Economists surveyed by Reuters expected orders would fall by 1 percent. Factory orders rose by a revised 3.8 percent in March.
European shares fell as disappointing data from the United States prompted concerns over a slowdown in the pace of economic recovery, causing a pull back in appetite for riskier assets.
Meanwhile, European Central Bank President Jean-Claude Trichet Thursday said there should be a euro-zone finance ministryto oversee euro zone fiscal policy.
In Asia, markets tumbled Thursday on heightened concerns about the global economic outlook, while political woes in Japan added to Tokyo selling as Prime Minister Naoto Kan said he would resign after he gets a nuclear crisis under control.
On Tap This Week:
THURSDAY: Chain store sales, natural gas inventories, oil inventories, money supply.
FRIDAY: Non-farm payroll report, ISM non-manufacturing index; Wal-Mart shareholder meeting.
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