NEW YORK – Wall Street’s four-day
rally ground to a halt on Thursday, with major indexes falling 1 percent on
caution ahead of a key labor market report expected to underscore fears the
economy is headed for another recession.
Financials were the biggest losers,
selling off sharply in the afternoon, led by Goldman Sachs Group Inc .
Goldman’s shares fell 3.5 percent to $112.16 after agreements with the Federal
Reserve and New York state’s banking regulator over wrongful foreclosures
raised concerns that Goldman is still not yet off the hook.
JPMorgan Chase & Co and
Bank of America Corp were the two
biggest losers on the Dow, both falling more than 3 percent.
A day ahead of the government’s release of
monthly payrolls data, a decline in the employment component of the Institute
for Supply Management’s factory activity index heightened worries that August
jobs growth will be weaker than feared. ISM’s factory activity index came in
only just above the level that indicates growth.
Recent employment indicators suggest
“zero growth in private payrolls,” said Jack Ablin, chief investment
officer at Harris Private Bank in Chicago. “If that comes to pass we are
going to have some big disappointments tomorrow.”
In another discouraging sign, the White
House, already struggling to turn around the high U.S. unemployment rate, cut
its economic growth outlook for the next two years.
After dropping more than 17 percent from
early July to early August, the S&P 500 had risen by 9 percent heading into
Thursday’s session, leaving investors reluctant to place big bets a day ahead
of the August labor report, which is expected to show an increase of 75,000
“The news over the past few days
hasn’t been conducive to the rally continuing, said Randy Bateman, chief
investment officer of Huntington Asset Management in Columbus, Ohio.
Bateman, who helps oversee $14.5 billion,
said he was not optimistic about the payroll report being strong.
The Dow Jones industrial average
<.DJI> was down 119.96 points, or 1.03 percent, at 11,493.57. The
Standard & Poor’s 500 Index <.SPX> was down 14.47 points, or 1.19
percent, at 1,204.42. The Nasdaq Composite Index <.IXIC> was down 33.42
points, or 1.30 percent, at 2,546.04.
The benchmark S&P gained more than 5
percent during the four-day rally that ended on Wednesday on increasing hopes
for a new stimulus plan from the Federal Reserve at its meeting in late
Shares of Netflix Inc fell
as much as 10 percent in extended trading after Starz Entertainment said it
would stop distributing its content on the online movie renter’s streaming
platform. Netflix stock later pared losses to trade down 5.5 percent at $211.06.
Ciena Corp , a communications equipment maker, jumped 20 percent to
$14.71 after posting a profit for the first time in three years. Cisco Systems
Inc , the network equipment maker, gained 1 percent to $15.82 and led
The S&P retail index <.RLX> fell
1.2 percent as retailers reported August same-store sales that were slightly
below expectations as Hurricane Irene drove business away from some stores.
Target Corp fell 1.2 percent to $51.06 while Costco Wholesale Corp added
1.2 percent to $79.48.
U.S. construction spending fell
unexpectedly in July as public outlays dropped to their lowest level since December
2006 and private spending also sagged, separate data showed.
Weekly jobless claims declined by 12,000
in the latest week, while nonfarm productivity was weaker than previously
thought in the second quarter.
Eleven stocks fell for every four that rose
on the New York Stock Exchange while on the Nasdaq one stock rose for every
four that fell.
Volume was light, with about 7.49 billion
shares traded on the New York Stock Exchange, the American Stock Exchange and
Nasdaq, below last year’s daily average of 8.47 billion.