Newspaper article THE JOURNAL RECORD

Stocks Fall on Evidence of Downturn

Newspaper article THE JOURNAL RECORD

Stocks Fall on Evidence of Downturn

Article excerpt

NEW YORK (AP) _ Stocks fell sharply on Thursday, as investors worried that an economic downturn may begin to eat into corporate profits.

The Dow Jones industrial average dropped 25.93 to 4,412.23, breaking a four-day winning streak and eroding gains of more than 97 points that had been made since last Thursday.

Declining issues outnumbered advancers by 1,180 to 1,056 on the New York Stock Exchange, with 728 issues left unchanged. Big Board volume totaled 341.82 million shares as of 4 p.m., down from 331.76 million on Wednesday.

Stocks fell in reaction to two economic reports that showed the economy is sluggish. Initial unemployment claims grew a surprising 13,000 in the week ended May 20, well above expectations. And sales of existing homes fell 6.4 percent, despite a drop in home mortgage rates.

The bad economic news sparked a rally in the bond market, and stocks followed bonds higher at the opening bell. But bonds quickly backed off their highs, trading close to unchanged for most of the day and paving the way for a retreat in stocks, traders said.

The data came one day after a report of Wednesday's surprisingly weak reading on orders of factory goods, noted A.C. Moore, president of Dunvegan Associates in Santa Barbara.

"The jobless numbers today added fuel to the fire that the durable-goods number created," Moore said. "That of course is positive for the bond market, but stock investors have to start questioning how strong earnings are going to continue to be."

The weak economic data also sent the dollar lower, which pressured stocks as well. The dollar fell more than 2 yen to 84.83 yen late in New York.

John Shaughnessy, research director at Advest Inc. in Hartford, Conn., said investors were using the bad economic news as an excuse to take profits from an overheated market.

"I don't really see us toppling into a recession," he said, "in fact, I expect acceleration of economic activity in the second quarter. …

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