Stocks Tread Lightly After Data

Mildly disappointing readings of jobless claims and U.S. service-sector activity kept stocks in check on Thursday.

The market has swung between gains and losses since the opening bell, with many investors on the sidelines ahead of monthly employment data due from the government on Friday.

Market Data Center >

• Most Actives | Gainers | Losers
• New Highs and Lows | Money Flows
• Intraday Futures | Currencies

"Beneath the surface of the market right now, there's a certain instinctive fear," that the late-year U.S. economic recovery that many traders bet on throughout the summer may not emerge, said strategist Carmine Grigoli, of Mizuho Securities. "Everyone is focusing on those [employment] numbers" as an important harbinger of consumer spending and overall growth.

The Dow Jones Industrial Average was recently up 26 points, or 0.3%, at 9306. The blue-chip measure is attempting to snap a four-day losing streak during which it has shed 300 points.

On the economic front Thursday, the Labor Department that initial claims for jobless benefits fell 4,000 to 570,000 in the week ended Aug. 29. Analysts had hoped to see a deeper decline in claims, to 562,000 filings. Also worrisome to the market, claims lasting more than one week rose 92,000 to 6.2 million.

Strategist Dan Greenhaus, of Miller Tabak in New York, pointed out to clients in a note that the average number of claims being filed was up by about 11,000 a week in August compared to July.

"The increase is not significant enough to change the general idea that the labor market is getting better," Mr. Greenhaus wrote. "However … [it] is indeed complicating." Mr. Greenhaus said he still expects to see the unemployment rate hit 10% before the job market makes a full recovery.

In another report released Thursday, the Institute for Supply Management said its nonmanufacturing index came in at 48.4 in August, an improvement from a 46.4 reading in July but still a level that suggests the sector is contracting. The August reading was also slightly below analysts' expectations of a 48.8 reading.

Retail stocks were cheered Thursday after retailers from Gap, Limited Brands, Target and Costco reported better-than-expected August sales. Still, overall results were mixed. MarketWatch's Andria Cheng reports.

Helping to offset traders' economic jitters was a rally in the financial sector, which has been roiled lately by analyst comments and heavy trading among short-term players. All the Dow's financial names traded higher, with J.P. Morgan Chase and Bank of America each up more than 2%. American Express and Travelers rose about 1%.

The S&P 500 was up 0.3%, bolstered by a 1.5% gain in its financial sector. It was helped by a 8.5% rise in American International Group and a 4.8% gain in Citigroup – two names that have accounted for a large percentage of overall market volume lately.

The technology-oriented Nasdaq Composite Index was up 0.3%. Its gains were held in check by declines in Oracle and Sun Microsystems after the European Commission opened an antitrust investigation into Oracle's planned $7.4 billion purchase of Sun. Each company's shares were off about 2% in recent action.

Elsewhere, monthly chain-store sales results suggested many consumers remain reluctant to splurge. Teen apparel retailers like Abercrombie & Fitch reported grim results, a troubling sign for the critical back-to-school shopping season. And though sales at some retailers slumped less than analysts forecast, demand generally remains weak. Abercrombie shares fell 4.3%.

Oil futures rose 10 cents to $68.15 a barrel and the dollar fell against the British pound but rose against the euro.

Gold and government bonds in particular benefited from safe-haven demand, though there's also speculation that China has been buying gold. Thursday, gold futures rose $15.40 an ounce while bonds dropped.

Markets Tread Water After Data

GEOFFREY ROGOW

Stocks were little changed Tuesday after mixed reports on housing, inflation and industrial production, following a nearly 200-point drop on Monday.

At 11:55 a.m., the Dow Jones Industrial Average fell about 18 points to 8593. The S&P 500-stock index was flat, with a 1.4% climb for its health-care sector, while the Nasdaq Composite Index rose 0.3% to 1821.11.

Economists expect a mixed picture to continue to emerge in reports this week. Positive data will continue to be laced with negative trends, they say, with the true direction of the economy likely unknown for months.

Market Data Center >

• Most Actives | Gainers | Losers
• New Highs and Lows | Money Flows
• Intraday Futures | Currencies

More

• Barron's: Will Bad News Be Good for the Dollar?
• MarketBeat: Dress Rehearsal for Quants

Still, the market is unlikely to see another huge dip like Monday's over the next couple weeks. Much like April and May, which ended with surges to close out both months, traders are expected to push aggressively into the market as the quarter draws to a close. Fund managers who underperformed the market will be looking at positioning after many waited for a pullback that has never come.

The Investment Company Institute noted that only about $50 billion has come into the market from these institutions since the March lows. About $2.5 trillion is sitting with those managers.

"The market simply won't fall too far now with all these managers needing to lower their cash positions," said Marc Pado, U.S. market strategist for Cantor Fitzgerald. "You'll see improvement, not because of the economy, but because managers have to show positioning that is appropriate with what we've seen."

The producer-price index for finished goods rose 0.2% in May from April, less than the 0.6% rise economists in a Dow Jones Newswires survey expected. The PPI fell 5% from a year ago, the biggest drop since August 1949. The core PPI, which excludes food and energy, slipped 0.1% from April, the first slide since October 2006. Economists had expected a 0.1% rise.

Housing starts rose 17.2% in May from April as apartment construction surged. Building permits increased 4%. Single-family starts climbed 7.5%, construction of housing with two or more units rose 61.7, and starts on homes with five or more units jumped 77.1%.

Consumer stocks were the weakest performers to start off the session, with consumer-discretionary and consumer-staples companies both off more than 0.1% in the S&P 500. Financials also declined.

Industrial production fell 1.1% in May, the Federal Reserve said, as capacity utilization fell to 68.3%. In April, capacity use was a revised 69.0%. The 1972-2008 average was 80.9%. The data largely matched expectations.

Worry that foreign governments could rotate more of their foreign-exchange reserves out of dollars put pressure on the U.S. currency, which slipped against the euro and the yen. Treasury prices declined. The yield on the benchmark 10-year note climbed to about 3.74%.

The dollar's slide helped commodities prices, which were hammered Monday as the greenback strengthened against most of its rivals. Crude-oil futures rose more than $1 a barrel to climb near $72 in recent trading.

Among stocks to watch, Best Buy sank by more than 6% after the electronics chain reported earnings that topped expectations and reiterated its outlook for the full year.

Stock benchmarks in Asia dropped sharply after Monday's drop on Wall Street. Japan's Nikkei 225 fell 2.9%. The FTSE 100 inched higher.