By Anora Mahmudova and Carla Mozee, MarketWatch
Employment cost index rises more than expected
NEW YORK (MarketWatch)--The Dow Jones Industrial Average dropped
by triple digits Thursday as investors weighed the implications of
robust economic growth and signs of rising wage inflation on
Federal Reserve policy.
The main benchmarks were on track to finish the volatile month
lower, the first monthly loss in 7 months for the S&P 500 and
Dow industrials.
By late morning, the S&P 500 (SPX) was 22 points, or 1.1%,
lower at 1,948.77 and was on track to record its first monthly loss
since January.
The Dow Jones Industrial Average (DJI) dropped 150 points, or
0.9%, to 16,727.11 and was set to finish the month lower. The
Nasdaq Composite (RIXF) lost 60 points, or 1.4%, to 4,410.52 and
looked set to close lower over the month.
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action.
Kristina Hooper, U.S. investment strategist at Allianz Global
Investors said investors are still assessing the GDP number and the
FOMC statement from Wednesday and are nervous ahead of the monthly
jobs data.
"Markets love certainty and right now there is too much
uncertainty about the Fed's trigger points for raising rates.
Instead of looking at one number, such as the unemployment rate,
the Fed is looking at a mosaic of data points. Investors are unsure
what the Fed would consider a tolerable level of higher inflation,"
said Hooper.
Weekly jobless claims rose slightly less than expected a week
after hitting a 14-year low. However the employment cost index rose
due to a larger-than-expected increase in wages. Many analysts
watch for wage inflation as a precursor to inflation.
Investors will continue to focus on company earnings. Also in
the spotlight is Argentina. Standard & Poor's Ratings Services
declared the country in selective default after talks aimed at a
settlement between Argentina and holdout creditors fell apart late
Wednesday.
"The markets seem to be digesting a lot of the data from
[Wednesday] along with the Fed statement. Even though there is a
good chance we'll see a revision to what was a surprisingly good Q2
GDP number, this does raise the specter of monetary tightening in
less than a year," said Brenda Kelly, chief market strategist at
IG, in emailed comments.
Corporate news
Among individual stocks, Avon (AVP) said second-quarter profit
fell on lackluster sales, particularly in Latin America and North
America. But the beauty product company's CEO Sheri McCoy said
management expects improved performance in the second half of the
year. Shares rose 4%.
Yum Brands Inc. (YUM) shares skidded 6.2% after the company said
illegal activities involving a Chinese supplier have significantly
hurt sales over the last couple of weeks.
After the bell, Tesla Motors (TSLA) will release quarterly
results.
Shares in Synchrony Financial (SYF) fell 1% after a giant
initial public offering was priced at $23, near the low end of
expectations. (Read more about the day's notable movers here:
http://www.marketwatch.com/story/whole-foods-gopro-and-tesla-are-stocks-to-watch-thursday-2014-07-31.)
In the commodities market, crude-oil futures (CLU4) fell below
$100 a barrel on bearish U.S. inventory data, while gold futures
(GCQ4) turned lower.
European stocks fell, and Asian equities closed mixed, with
Japan's Nikkei Average ending down by 0.2%.
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