Stocks tumbled Thursday, as investors were pummeled by an unexpected jump in weekly unemployment claims, a disappointing 2005 forecast from General Motors and a sharp rise in crude oil prices, which triggered concerns of higher energy costs squeezing corporate profits.
Much of the sell-off came late in the trading session. The Dow Jones industrial average was down 111.95 points, or 1.1 percent, at the close, while the broader Standard & Poor’s 500-stock index was down 10.25 points, or 0.9 percent. The Nasdaq composite index, full of technology stocks, finished Thursday with a loss of 21.97 points, or 1.1 percent.
Crude oil futures extended their recent gains, surging to a six-week high and surpassing $48 per barrel, as investors worried about declining U.S. reserves, the Iraqi elections and evidence of OPEC production cuts. A barrel of light crude settled at $48.04, up $1.67 on the New York Mercantile Exchange.
Wall Street also was unnerved by the latest first-time jobless claims report, which showed a jump of 10,000 claims to 367,000 last week, a three-month high. After Friday’s modest job creation report, the labor market remained a major concern for investors.
But while the markets held on with only modest losses through most of the day, General Motors’ outlook — at the low end of Wall Street expectations — sent stocks tumbling.
“You get a little bad news, and there’s nobody willing to step up and buy on the dip,” said Bryan Piskorowski, market analyst at Wachovia Securities. “It’s the same pattern we’ve seen nearly every day this year. Investors are being very conservative and playing this day-to-day. It’s not new to the market that GM’s robbing Peter to pay Paul, but it was enough to trigger some sell programs.”
Mediocre economic data and surging oil prices, combined with continued investor unease about the profit outlooks for 2005, have overshadowed strong earnings reports this week from tech heavyweights Intel Corp. and Apple Computer Inc.
“These [earnings] numbers are unambiguously good, and you’re seeing a nice run-up in those stocks, but they aren’t spilling over into the rest of the sector,” said Russ Koesterich, U.S. equity strategist at State Street Corp. in Boston.
Analysts said investor nervousness has pressured stocks, but strong economic reports and more positive earnings statements could shake the market out of its malaise.
“It’s a pretty sluggish trade right now, and it’ll take something big to get us out of it either way,” said Neil Massa, an equity trader at John Hancock Funds. “It seems like we’re due for some sort of relief rally after all this selling, but that’ll depend on the economic numbers and some positive outlooks for 2005 [from companies].”
The Commerce Department’s December report on retail sales failed to impress investors. Sales rose 1.2 percent for the month, better than the 1.1 percent hike economists had forecast. However, taking auto sales out of the equation, retail sales rose just 0.3 percent, less than the 0.4 percent Wall Street expected.
But there was upbeat news from Apple, which had an impressive fourth quarter, beating Wall Street profit forecasts by 21 cents per share. The company credited strong sales of its popular iPod music player for quadrupling its profits from a year ago. Apple climbed $4.34 to $69.80 after reaching a four-year high in intra-day trading.
Dow component GM fell after predicting 2005 earnings of $4 to $5 per share. Wall Street analysts had projected $4.78 per share. The outlook was disappointing given GM’s projected earnings of $6 to $6.50 for 2004. General Motors fell 99 cents to $37.40.
Pfizer Inc., another Dow industrial, lost 70 cents to $25.33 after the Food and Drug Administration warned that the company’s advertising for pain medications Celebrex and Bextra was misleading due to unrealistic effectiveness claims. Celebrex, the arthritis drug, was shown in recent studies to increase the risk of heart complications.
The Securities and Exchange Commission announced that it will not take action against Google Inc. for violating the SEC’s “quiet period” rules during its initial public offering by allowing a Playboy interview with the company’s founders to be published. Google nonetheless slipped 5 cents to $195.33.
A medical journal and the Defense Department have come to the defense of Taser International Inc.’s non-lethal stun weapons. The Pacing and Clinical Electrophysiology Journal and the Pentagon said the weapons are safe to use. Taser surged $3.79, or 22.3 percent, to $20.80.
Overseas, Japan’s Nikkei stock average fell 0.83 percent. In Europe, Britain’s FTSE 100 closed up 0.35 percent, France’s CAC-40 gained 0.47 percent for the session and Germany’s DAX index climbed 0.08 percent.