Stocks finished sharply lower Thursday, as a rise in oil and metals prices stoked inflation worries. Higher Treasury yields and a tepid response to the Federal Reserve's interest-rate policy statement Wednesday also contributed to profit-taking after recent gains in the blue-chip indexes, says Standard & Poor's Equity Research.
The Dow Jones industrial average fell 147.6 points, or 1.27%, to 11,495.05, trailed by American International Group (AIG) and General Motors (GM). The broader Standard & Poor's 500 index declined 17.84 points, or 1.35%, to 1,305.01. The tech-heavy Nasdaq composite slid 46.67 points, or 2.01%, to 2,274.07. All three indexes logged their biggest one-day losses since Jan. 20.
A set of mostly upbeat economic reports kicked off Thursday's session. The Commerce Dept. said retail sales rose 0.5% in April, less than expected. Separately, initial jobless claims eased 1,000 to 324,000 for the week ended May 6, according to the Labor Dept. Meanwhile, U.S. business inventories rose 0.7% in March. That was more than expected, says Action Economics.
The numbers suggest a solid economy, some analysts say. "GDP growth appears to be on track for a strong gain in the first half of 2006," says Conrad Dequadros, a senior analyst at Bear Stearns.
On the economic docket Friday, the March trade deficit is expected to increase to $66.5 billion, says Action Economics. April import prices are projected to rise 1.7%, while export prices hold steady. Also Friday, the University of Michigan's preliminary May reading for consumer sentiment is seen edging lower to 86.0.
Earnings season was winding down. American International Group (AIG) declined after the insurer posted 16% lower first-quarter profit.
Rupert Murdoch's News Corp. (NWS) was higher after the company reported its third-quarter earnings more than doubled. Rival media behemoth Viacom (VIA) fell on a 9% decline in first-quarter earnings.
Among other stocks in the news, aluminum giant Alcoa (AA) was lower after advancing early, as aluminum prices rose to their highest level since June, 1988.
Computer maker Dell (DELL) was lower following a state court's dismissal of a suit challenging $300 million in incentives given to Dell to locate a plant in North Carolina.
On the brokerage front, Johnson & Johnson (JNJ) rose after Banc of America Securities boosted the stock from neutral to buy.
Elsewhere, UnitedHealth Group (UNH) was lower after the health insurer said it may to restate results for the past three years because of its stock-options accounting practices.
In the energy markets Thursday, June West Texas Intermediate crude oil futures closed up $1.19 at $73.32 a barrel amid fresh supply concerns. Exxon Mobil (XOM) was down after an early advance on the news.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 41.4 points, or 0.68%, to 6,042. Germany's DAX index skidded 63.66 points, or 1.04%, to 6,054.72. In Paris, the CAC 40 index slipped 15.33 points, or 0.29%, to 5,262.94.
Asian markets finished mixed. Japan's Nikkei 225 index slid 89.79 points, or 0.53%, to 16,862.14. In Hong Kong, the Hang Seng index rose 60.19 points, or 0.35%, to 17,140.78. Korea's Kospi index climbed 13.61 points, or 0.94%, to 1,464.7.
Increased supply, created by corporate security issuances and a 10-year note auction, kept pressure on the Treasuries market, says S&P Equity Research. Prices for 10-year Treasury notes dropped to 95-00/32 with a yield of 5.16%, while 30-year bonds fell to 89-00/32 for a yield of 5.23%.