Stocks ended solidly lower on Thursday as a slew of negative corporate news added to investor concern after a weaker-than-expected report on jobless claims. A climb in oil prices to the $39-a-barrel mark also weighed on the market.
The Dow Jones industrial average fell 102.13 points, or 0.98%, to 10,333.71. The broader Standard & Poor's 500 index was off 11.92 points, or 1.04%, to 1,128.92. The tech-heavy Nasdaq composite index lost 32.24 points, or 1.57%, to 2,015.55.
Looking ahead, investors are anxiously awaiting the release of June payroll figures on Friday. The economy is expected to have added 265,000 non-farm jobs in the month vs. 248,000 added in May. The unemployment rate is expected to hold steady at 5.6%.
Meantime, U.S. factory orders are expected to have fallen 0.9% in May compared with a 1.7% drop in the previous month. Friday's session could be quieter than most as traders are expected to head out early as exchanges will be closed on Monday for the Independence Day holiday.
Thursday's sell-off came a day after the Federal Reserve raised interest rates by a quarter of a percentage point, as expected, and reiterated that a "measured" pace was needed to fight off inflation. Although the hike was largely priced into stocks, higher borrowing costs can crimp company profits and thus hurt stocks.
Among the stocks news dismaying investors was word from General Motors (GM), the world's largest automaker, that its June U.S. sales fell by 15% as its incentives and discounts failed to entice potential car buyers.
Meantime, Smith Barney lowered its rating on Internet services provider Yahoo (YHOO) to hold from buy, saying the stock had gotten too pricey.
In another high-profile analyst downgrade, Merrill Lynch cut its rating on aerospace and defense giant Boeing (BA) to neutral from buy.
The mood on Wall Street soured early Thursday after initial jobless claims for the week ending June 26 rose by an unexpected 1,000 to 351,000 in the week from upward revised 350,000 reading the week before. Economists had been expecting a fall in claims. According to Informa Global Markets, while the 4-week moving average remains some 13% below the 400,000 boom/bust level, the sideways pattern is more consistent with GDP growth under 4%.
In other economics news, the Institute for Supply Management index of manufacturing activity cooled to 61.1 in June vs. a prior 62.8 and expectations of a reading in the 61-62 range. Although the gauge suggests the growth rate has slowed, any number over 50 still indicated expansion. The orders index now stands at 60.0 vs 62.8 in May, employment at 59.7 vs 61.9, prices paid 81.0 vs 86.0, according to Informa Global Markets.
"These are quite good figures, with the strength in orders particularly worth noting, after weakness in other measures of orders," Informa Global Markets says.
On the corporate front, some big names had some discouraging outlooks on profits. Drug wholesaler Cardinal Health (CAH) led healthcare stocks lower after it reduced its June-quarter guidance. In an unrelated matter, the U.S. Securities and Exchange Commission subpoenaed Cardinal over how it classified revenues.
Chip equipment issues, meanwhile, were hurt by lowered June-quarter guidance from Amkor Technologies (AMKR), which cited weak gross margin. Amkor shares were sharply lower.
Biomet (BMET), which makes orthopedic devices, posted higher fiscal fourth quarter profits, thanks to higher sales of reconstructive implants and spinal hardware products.
Constellation Brands (STZ), which distributes alcoholic beverages such as Corona beer and Arbor Mist wines, posted better-than-expected quarterly earnings when one time items were excluded.
Horse racing track operator Churchill Downs (CHDN), which hosts the Kentucky Derby, cut its second quarter and 2004 earnings forecasts.
In merger news, a Reuters report says media giant Time Warner (TWX) would make a $4.8 billion offer to acquire movie studio MGM (MGM), citing a source close to the plans.
Treasury prices ended mostly higher on the sell-off in stocks. Poor monthly sales figures from Ford Motor (F) and General Motors (GM) helped boost prices. A grinding bid persisted all afternoon as stocks stayed pressured and the Street squared for the jobs report, reports Informa Global Markets.
European stock markets closed lower on Thursday. London's FTSE 100 index was off 39.40 points, or 0.88%, to 4,424.70, even though the UK June Manufacturing PMI fell to 54.8 from a revised 55.7. However, the output component rose to a six-month high 57.5 from 57.2. Sainsbury was lower after an announcement that CEO Sir Peter Davis is stepping down as CEO, to be replaced by Philip Hampton. Marks & Spencer was off after Philip Green denied reports that he may abandon the battle to gain control of the retailing company.
Germany's DAX index eased 17.71 points, or 0.44%, to 4,035.02 as German Retail Sales fell 1.7% in May, the first decline in 3 months. Volkswagen was lower after it said sales in China were up but profits were thin. ThyssenKrupp was higher after a report that the company was considering raising prices for its electrical steel. HypoVereinsbank was up after the Financial Times said the company has had exploratory talks with 4 European banks.
In Paris, the CAC 40 index lost 16.79 points, or 0.45%, to 3,716.20 as French PMI rose to 55.8 in June from 55.5 in May. France Telecom, Atos and Cap Gemini were higher after J.P. Morgan upgraded its opinion on the telecom sector. Business Objects is the subject of takeover speculation and Societe Generale rates it top pick in the sector. Scor was higher on broker upgrades and is to present its 3-year restructuring plan in early autumn, according to Le Figaro.
Asian markets finished mixed on Wednesday. In Japan, the Nikkei index added 37.14 points, or 0.31%, to close at 11,896.01.
In Hong Kong, markets were closed on Thursday.