Stocks Finish Lower

The major indexes were held down by inflation concerns and caution ahead of Friday's September labor report

Stocks lost ground for a third straight day as investors worried about inflation and were cautious ahead of Friday's September labor report.

The Dow Jones industrial average lost 30.26 points, or 0.29%, to 10,287.1. The broader Standard & Poor's 500 index was down 4.9 points, or 0.41%, to 1,191.49. The tech-heavy Nasdaq composite index fell 18.94 points, or 0.9%, to 2,084.08.

Oil prices fell to two-month lows on Thursday amid slowing demand, says Action Economics. Crude oil was down $1.43 to $61.36 a barrel, while front-month gasoline dropped over 7 cents a gallon to end the day at $1.8350. The story since Wednesday has been falling demand for both crude and refined products, which when combined with a record pace of gasoline imports, has weighed heavily on the NYMEX complex, says Action Economics.

On Friday, September payrolls are expected to drop by 143,000. There is a lot of uncertainty regarding the impact of Hurricane Katrina, with survey estimates for payrolls ranging from a decline of 300,000 to an increase of 50,000, says Action Economics. The unemployment rate is forecast to rise to 5.1% from 4.9% in August.

The Bureau of Labor Statistics is expected to provide a direct estimate of the hurricane related impact, which will help clarify the picture, says Action Economics. However, Action says the related spike in energy prices during the survey period could damp hiring at the national level -- thus leaving the true hurricane distortion likely larger than what the BLS will indicate.

"Whatever the result, the report is not likely to change the course for Fed policy, as policymakers view the disruptions as temporary and expect upside strength in the economy from the rebuilding effort," says Action Economics.

Also coming Friday are updates on consumer credit and wholesale trade.

On Thursday, Dallas Federal Reserve President Richard Fisher reiterated his remarks earlier in the week on core inflation "edging closer to the upper end of the Fed tolerance zone." He is concerned that businesses will pass on higher energy costs and warns that the "fiscal predicament" could also impact the inflation outlook, says Action Economics.

In economic news, U.S. jobless claims rose 21,000 to 390,000 in the week ended Oct. 1, from 360,000 the week before (revised from 356k). Given the hurricane distortions, the markets may not react much to the data, says Action Economics. Plus, the markets are focused on the September labor report tomorrow.

Retailers reported mixed sales for September, as consumers felt the pinch from higher energy prices. However, same-store sales for last month were generally not as bad as some had feared given the hurricanes, notes Standard & Poor's MarketScope.

Wal-Mart Stores (WMT ) posted 3.8% higher total U.S. same-store sales and 9.7% higher total company sales. The retailer sees U.S. October same-store sales up 2%-4%. The company maintains 55-59 cents third-quarter earnings per share guidance.

Costco Wholesale (COST ) posts fourth-quarter EPS of 73 cents, vs. 62 cents a year earlier (GAAP), on 7% higher same-store sales and 10% higher total sales. It reported 11% higher September same-store sales and 13% higher total sales. The retailer set a $1 billion stock buyback. The stock rose.

Merck (MRK ) shares rose after the drug maker reported its investigational vaccine Gardasil prevented 100% of cervical pre-cancers and non-invasive cervical cancers associated with HPV Types 16 and 18 in a new Phase III clinical study.

Treasury Market

Treasury yields finished mostly flat after the larger-than-expected hurricane-related jump in jobless claims. The benchmark 10-year note yield settled at 4.36%.

World Markets

European stock markets finished lower on Thursday. London's Financial Times-Stock Exchange 100 index was down 55.4 points, or 1.02%, at 5,372.4.

Germany's DAX index fell 52.15 points, or 1.03%, to 5,017.27. In Paris, the CAC 40 index lost 57.21 points, or 1.25%, to 4,536.9.

Asian markets plunged on Thursday, following the weakness on Wall Street. Hawkish Fedspeak this week is raising concerns that more rate hikes, alongside higher energy prices, will hurt fourth-quarter growth in the U.S. Such prospects have prompted fears of slackening demand for imports from Asia and an adverse impact on the global economy, says Standard & Poor's MarketScope. Losses were exacerbated by profit taking in Japan and South Korea due to concerns the indexes had run up too far.

In Japan, the Nikkei 225 index sank 330.38 points, or 2.41%, to 13,359.51. says Standard & Poor's MarketScope.

Hong Kong's Hang Seng index tumbled 321.73 points, or 2.12%, to 14,839.3. The market was hurt because Hong Kong's rates generally track U.S. rates since the local currency is pegged to the dollar, says Standard & Poor's MarketScope.