By Kate Gibson
U.S. stocks crumpled Thursday as disheartening data on the jobs
market and regional manufacturing furthered doubts about the
recovery, circumventing enthusiasm that came with Intel Corp.'s
$7.7 billion deal to acquire McAfee Inc.
The Dow Jones Industrial Average (DJI) closed down 144.33
points, or 1.4%, to end at 10,271.21, with all 30 components in the
red for the day. The blue-chip average's loss broke two straight
days of gains.
The hit to Wall Street came after a government report showed
weekly jobless claims rising to a nine-month high.
In addition, manufacturing in the Philadelphia region contracted
and the Conference Board said its index of leading economic
indicators climbed just 0.1% in July, with the lackluster rise
pointing to slowing growth. .
"As we worked our way over the past couple of months, the one
thing we could hang our hat on was that at least manufacturing is
working and hopefully the non-manufacturing sector will kick in,"
Art Hogan, chief market strategist at Jefferies & Company, said
of the disappointing reports. Hear what Hogan has to say about
prospects of a double-dip.
"The outlook for the economy over the next few quarters with a
lack of jobs growth is very uncertain," said Michael Sheldon, chief
market strategist at RDM Financial Group.
Intel (INTC) led declines in the Dow industrials, with shares
falling 3.5% after the company announced plans to acquire security
software maker McAfee (MFE) for cash in the chipmaker's
largest-ever deal. Intel is paying a roughly 60% premium over
McAfee's closing price Wednesday. .
"It's nice that Fortune 500 companies are sitting on $2 trillion
in cash, and the potential of more buyouts may be on the horizon,"
said Todd Schoenberg, managing director at LandColt Trading.
But "companies are not using this cash to add to payrolls, and
eventually this will be the primary reason why we may be returning
to recessionary times," Schoenberg added.
The S&P 500 Index (SPX) fell 18.53 points, or 1.7%, to
1,075.63, with financials leading all 10 sectors lower.
"If the market continues its slide tomorrow, I expect the
S&P 500 to make a stand in the 1,055 to 1,060 area," wrote
Elliot Spar, market strategist at Stifel Nicolaus.
The Nasdaq Composite (RIXF) declined 36.75 points, or 1.66%, to
2,178.95.
Losers outpaced advancers by a roughly 5-to-1 ratio on the New
York Stock Exchange, where 1.07 billion shares traded. Composite
volume hit 4.44 billion.
Crude-oil futures retreated to end at $74.43 a barrel, and gold
hit a seven-week high and closed at $1,235.40 an ounce on the Comex
division of the New York Mercantile Exchange. .
Bond bulls
"The most bullish reason that investors should buy stocks right
now is that when you compare the dividend on high-quality,
blue-chip stocks with the yield on risk-free Treasury bonds, and
you have a five-to-10-year horizon, stocks look relatively
attractive," said RDM's Sheldon.
But given the shaky economic environment, "it's hard to make
that leap of faith for investors piling money into the fixed-income
market that they should change course," Sheldon added.
On Wednesday, investors continued to pour resources into
government bonds, as the government said it would sell $109 billion
in debt next week. .
The flight to assets perceived as safe strengthened the U.S.
dollar, with the dollar index (DXY) at 82.54 from 82.17 late
Wednesday. .