Wall Street: Thursday close

13 April 2012

AN UNEXPECTED rise in jobless claims unnerved Wall Street, sending stocks sharply lower on worries the market's recent rally might have gone too far, too fast.

Yahoo!

'Yahoo didn't deliver significant upside, and it's a huge name, so you have some momentum taken out of the market,' said Keith Keenan, vice president of institutional trading at Wall Street Access, a New York-based brokerage firm. 'The bulls anticipated much higher numbers.'

The Dow Jones Industrial Average closed down 120.17, or 1.3%, at 9036.04, having lost 66 points on Wednesday. It was the sharpest drop since 23 June, when it closed 127.80 points lower.

The broader market also fell. The Nasdaq composite index dropped 31.6, or 1.8%, to 1715.86. The Standard & Poor's 500 index fell 13.51, or 1.4%, to 988.70.

Yahoo slid $2.73, or 7.7%, to $32.56 after the internet company reported doubled quarterly profits. The result was in line with forecasts, but First Albany lowered the company's stock rating to 'neutral' from 'buy,' citing in part possible overvaluation.

The Labour Department reported that new jobless claims rose last week by a seasonally adjusted 5,000 to 439,000, the highest since the week ending 31 May. Economists had been expecting a fall in claims.

Comments from Federal Reserve chairman Alan Greenspan that high natural gas prices might not be alleviated soon also appeared to pressure shares. Greenspan said the high prices would probably cause some industries to lose business to foreign competitors, but added that the overall economic impact was unclear.

Stocks have surged in recent months as investors grow increasingly upbeat about a solid economic recovery by year's end. But analysts say investors now want to see more concrete evidence of improvement, particularly in the tech sector, which has seen particularly strong gains.

Still, analysts described Thursday's falls as more of a natural pullback. On Tuesday, the Nasdaq composite reached a near 15-month high, while the Dow and S&P traded at levels not seen in a year.

'Overall, the market is going to be a lot choppier than we've seen the last few months,' said Steven Goldman, chief market strategist at Weeden & Co in Greenwich, Connecticut. 'When we punch out to new highs, you become vulnerable to setbacks.'

Keenan agreed. He said stocks will probably trade in a range in the coming weeks as companies largely meet, if not slightly beat, estimates during the second-quarter earnings season. 'At this point, I don't think you'll see a huge trend reversal,' Keenan said.

Abbott Laboratories fell 13 cents to $43.55 after the company posted operating profits in line with previous estimates.

Several retailers also took a hit following reports of tepid June sales. Wal-Mart slipped 13 cents to $55.63 after posting a small sales gain that fell below estimates, while American Eagle Outfitters dropped 40 cents to $19.25.

Coinstar tumbled $5.59, or 29.5%, to $13.35 after the provider of self-service coin processing said it couldn't reach a new agreement with grocery store chain Safeway Inc prompting it to lower its year-long outlook.

PepsiCo rose $2.40 to $46.95 after the food and beverage giant reported a rise in quarterly profits that met analysts' expectations.

Falling issues outnumbered risers nearly 3 to 1 on the New York Stock Exchange. Volume was moderate. The Russell 2000 index, a barometer of smaller company stocks, fell 7.96, or 1.7%, to 469.03.

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