By Kate Gibson
U.S. stocks finished Thursday's volatile session off earlier
lows but still well in the red after reports on joblessness,
manufacturing and housing fueled concern about the economy ahead of
the key monthly employment report Friday.
"The 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 down 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) remained mired in a sixth consecutive session of
losses to finish down 41.49 points, or 0.4%, to 9,732.53.
The blue-chip average was weighed down by Bank of America Corp.
(BAC), down 2.4%; General Electric Co. (GE), down 2.1%; and J.P.
Morgan Chase & Co. (JPM), off 1.3%.
Down more than 16% from its 2010 high at the end of April, the
S&P 500 Index (SPX) on Thursday fell to its lowest level since
early September 2009. The broad market gauge ended down 3.34
points, or 0.3%, to 1,027.37.
Health care fronted the losses that extended to eight of the
index's 10 industry groups. Among the laggards, Coventry Health
Care Inc. (CVH) shares were down 2.8%, 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 2% after the for-profit educator late
Wednesday reported better-than-expected results.
The Nasdaq Composite Index (RIXF) dropped 7.88 points, or 0.4%,
to 2,101.36.
Decliners ran past advancers by 3 to 2 on the New York Stock
Exchange, where 1.6 billion shares traded.
Gold tarnished
The selling was widespread, with investors unloading commodities
such as gold, which fell $39.20 to finish at $1,206.70 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.
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 came 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 of J.P. Morgan Funds, 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 time frames.
"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," he added.
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 said its
surveyed members 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.