Stocks Down Hard After Gov't Jobless Data

NEW YORK – Stocks buckled Thursday under the growing belief that the global economy is weaker than many investors expected and likely to stop companies from hiring.

A recovery in employment is seen as the biggest obstacle to a rebound in the economy and the unexpected increase in weekly unemployment claims provided another reminder that a recovery will be difficult. The report reduced expectations that the government's January jobs report on Friday will show that employers added workers in the first month of the year.

The Labor Department said unemployment claims rose 8,000 to a seasonally adjusted 480,000 last week. Economists had predicted claims would drop to 460,000. It was the fourth increase in the past five weeks. The number of lost jobs was the highest in two months and upended a sense that claims would resume a decline that occurred in the fall and early winter.

Friday's January report is expected to show employers added a small number of jobs but that the unemployment rate rose to 10.1 percent from 10 percent.

The jobs figures overshadowed the Labor Department's finding that worker productivity rose more than expected in the final three months of 2009. Rising productivity can help boost company profits and but also can make it easier for employers to put off hiring.

Productivity rose by a seasonally adjusted 6.2 percent in the fourth quarter. Analysts had expected a 6 percent increase.

The drop in stocks also came as European markets tumbled on concerns about onerous debt levels in countries including Greece, Spain and Portugal.

The euro hit a seven-month low against the dollar. A stronger dollar can drag down stocks in the U.S. because it hurts companies that have large international operations.

There were bright spots. Many retailers reporting sales at stores open at least a year came in well ahead of expectations, a promising signs that some consumers are more willing to spend. Macy's Inc., for example, raised its profit forecast after sales rose and it discounted fewer items.

The Dow fell 268.37, or 2.6 percent, to 10,002.18. The Dow has fallen 723 points, or 6.7 percent, since closing at a 15-month high of 10,725.43 on Jan. 19.

The broader Standard & Poor's 500 index fell 34.17, or 3.1 percent, to 1,063.11, while the Nasdaq composite index slid 65.48, or 3 percent, to 2,125.43.

The market's drop was the latest leg of a stumble that began in mid-January. Stocks fell then in response to China's attempts to curb its overheated growth. Those moves raised fears that the other world economies could suffer as a result. The pullback in stocks worsened as leaders in Washington said they would impose tighter regulations on U.S. banks.

"The market is becoming aware that the wall of cash that lifted it last year is coming to an end," said Jon Merriman, chief executive of Merriman Curhan Ford in San Francisco.

Source: Reuters

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