By Kate Gibson
U.S. stocks fell Thursday as the latest batch of economic data
did little to quench the notion that the recovery is in
trouble.
"There market is pricing in an economic future that is more
dismal than reality. I don't think we're going to see a double-dip
recession, but you could fairly say the market is pricing it in,"
said David Kelly, chief market strategist at J.P. Morgan Funds.
In a dismal start to the third quarter, stocks tumbled after
disappointing reports on the labor, housing and manufacturing
sectors.
Recovering from a 150-point drop, the Dow Jones Industrial
Average (DJI) was off 60.99 points at 9,713.03, with 24 of its 30
components sliding. Bank of America Corp. (BAC) and J.P. Morgan
Chase & Co. (JPM) sustained the heaviest damage, the former off
2.9% and the latter down 2.1%.
The S&P 500 Index (SPX) dropped 16.15 points to 1,014.56,
with health care fronting the losses among the index's 10 industry
groups. Among the laggards, Coventry Health Care Inc. (CVH) shares
were down 4.4%, a day after the insurer said it would acquire Mercy
Health Plans for an undisclosed sum.
Consumer-discretionary companies fared the best, with Apollo
Group Inc. (APOL) up 4.8% after the for-profit educator late
Wednesday reported better-than-expected results.
The Nasdaq Composite Index (RIXF) fell 33.83 points to
2,075.41.
Decliners ran past advancers more than 2 to 1 on the New York
Stock Exchange, where 810 million shares traded as of 1:25 p.m.
Eastern.
Gold tarnished
The selling was widespread, with investors unloading commodities
such as gold, which was down nearly $40 at $1,207.10 an ounce on
the New York Mercantile Exchange.
On Thursday, the government reported initial claims for jobless
benefits climbed 13,000 last week to 472,000. Economists had
expected claims to fall.
Separately, the National Association of Realtors said its count
of pending home sales declined to a new low in May after a flurry
of buying to take advantage of a tax credit that expired at the end
of April.
And, the Institute for Supply Management reported its
manufacturing index declined in June, though the industry trade
group said the sector seemed to still be expanding.
The soft economic data come in the wake of a downbeat second
quarter for investors and one day before the government's June
employment report.
The reports did nothing to "change the impression the economy is
in a slow patch here," said Kelly, who believes the market's
volatility is in large part due to an exodus of individual
investors, leaving mostly hedge funds and others with shorter
timeframes.
"The ghost that is haunting us is the flash crash on May 6. I
don't think professionals realize how rattled individual investors
were by that. For many individual investors, that was the last
straw," Kelly said.
Yet, individual investors increased their holdings of stocks in
June, though still keeping a smaller percentage than average in
equities, according to a survey released Thursday.
The American Association of Individual Investors held nearly 52%
of assets in stocks and related funds last month, up 1.9 percentage
points from May. The historical average is 60%, according to the
AAII.