Stocks continued to tumble Thursday after a series of disappointing economic reports and despite an uptick in mergers and acquisitions activity.
The Dow Jones Industrial Averagewas down more than 175 points, after gaining the past two trading sessions. All 30 Dow components are lower, with General ElectricAlcoa and Intel down the most.
The S&P 500and the Nasdaqwere also down. The CBOE Volatility Index, widely considered the best gauge of fear in the market, was up more than 7 percent, above 26.
The key S&P 500 sectors were all lower, with industrials, materials and consumer discretionary stocks leading the way.
In economic news, The Philadelphia Federal Reserve's monthly survey of economic activity in the Mid-Atlantic region fell by 7.7 percent, the lowest level in more than a year,after rising 5.1 in July. The index was forecast to rise to 7.0.
Also, the Conference Board reported its index of leading economic indicators rose slightly, by 0.1 percent in July after falling 0.3 percent in June, revised lower from a previously reported 0.2 percent drop.
In other news on the economy, the Congressional Budget Office forecasted that the U.S. budget deficit will be slightly less in 2010 than projected in March, at $1.342 trillion. The deficit for 2011, however, will be modestly higher than the March estimate at $1.066 trillion, according to Reuters.
And the Labor Department reported first-time claims for jobless benefits rose by 12,000 to 500,000for the week ended Aug. 14, more than the 480,000 weekly total forecasted by economists. Claims for the prior week were revised up to 488,000 from the previously reported 484,000.
The news was disheartening to investors who had hoped to see signs of job growth in the weekly figures.
"It's nice that Fortune 500 companies are sitting on $2 trillion in cash and the potential of more buyouts may be on the horizon (i.e., Potash/BHP, Intel/Mcafee), but it still doesn't cure the underlying problem of limited job creation in the U.S.," said Todd M. Schoenberger, managing director LandColt Trading.
"Companies are not using this cash to add to payrolls, and eventually this will be the primary reason why we may return to recessionary times," Schoenberger said. "Bonds and cash seem to be the most logical place to be for the immediate future."
Trading activity lately has been highly sensitive to economic news, and Thursday was no exception, said Randy Frederick, director of trading and derivatives for Charles Schwab.
As a result, intraday volatility is very high, making it difficult for investors who can't watch the markets every minute, Frederick said.
"That’s why we see volumes down, and why we see such interest in fixed-income products," he said, adding that he doesn't see an end to this trend.
"I absolutely think this volatity on an intraday basis will continue until we see leveling off in these economic indidcators, which we haven't seen yet," Frederick said.
On the M&A front, Intel shares were down more than 3 percent after the tech giant announced Thursdayit will acquire software and computer security company McAfee. McAfee shares are soaring along with other software and copmuter security companies, including Symantec .
Also, First Niagara Financial was down more than 5 percent after news it plans to acquire New Alliance Bancshares for $1.5 billion.
And BHP Billiton is working on getting regulators to approveits $39 billion hostile bid for Potash before the company approaches shareholders, Reuters is reporting. Potash's board already rejected the offer.
In earnings news, Sears was down more than 3 percent after reporting a lower second-quarter loss than a year ago, thanks to results at Kmart. But the figures were still short of analyst estimates.
Staples was trading lower after reporting second-quarter net income rose40 percent, as expected, but sales were flat, below analysts expectations. The office-supply retailer sees a modest boost in the second half of the year.
Williams-Sonoma was also lower despite a strong quarterly report showing an uptick in profits and a positive outlook for the full-year.
Petsmart was higher after raising 2010 guidance. Semiconductor-equipment makerApplied Materials and retailer Limited Brands were slightly lower after their earnings reports.
Retailer Hot Topic was lower after releasing weak earnings, but data storage equipment maker NetApp was higher.
Hewlett-Packard , Dell , Gap , Intuit , and Aeropostale will issue their earnings results after the bell Thursday.
Gap shares were lower after Standpoint Research initiated a buy on the retailer with a price target of $25.
In other company news, General Motorsfiled for an initial public offering of stock Wednesday, as expected. And SanDisk announced plans to sell at least $1 billion in convertible notes.
Also AIG is lower following news it is reportedly considering a bond sale before the end of the year, which would be the insurer's first debt offering in two years, according to the Wall Street Journal.
Also on the economic front, St. Louis Federal Reserve President James Bullard is scheduled to speak in Arizona at 1 pm in Rogers, Arkansas, with the economic outlook and monetary policy on the agenda.
On The Calendar:
THURSDAY: Earnings after the bell from HP, Dell, Gap and Intuit
FRIDAY: No major events scheduled
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