Stocks fall despite Japanese bank move

Wall Street surrendered early gains and closed lower Thursday as a higher U.S. trade deficit and questions about the labor market squelched enthusiasm over a policy change at the Bank of Japan.

The market was cheered after the Japanese central bank signaled an end to its current interest rate policy, set in place five years ago to fight inflation and also lift a sagging economy. The new policy, focused less on rising prices and more on Japan’s growing economic strength, encouraged U.S. investors worried about the Federal Reserve’s stance on interest rates and inflation.

“Now you have the Bank of Japan, the European Central Bank and the Federal Reserve all with the same interest rate policy, and that’s very positive,” said Peter Cardillo, chief strategist, and senior vice president at S.W. Bach & Co. “It’s a strong indication that global central bankers will contain inflation and not necessarily choke off economic activity, which has been a big concern here.”

However, the session’s gains slipped away by early afternoon as investors focused on increasing unemployment claims, which climbed above the 300,000 mark for the first time in eight weeks, and awaited the Labor Department’s monthly job creation report, due Friday. A new record for the nation’s trade gap also darkened investors’ mood, which has soured in recent days amid continued uncertainty over the economy and the Fed’s interest rate policy.

The Dow Jones industrial average fell 33.46, or 0.3 percent, to 10,972.28.

Broader stock indicators also fell. The Standard & Poor’s 500 index lost 6.24, or 0.49 percent, to 1,272.23, and the Nasdaq composite index dropped 17.74, or 0.78 percent, to 2,249.72.

In the bond market, prices moderated as the yields on long-term Treasuries began to outpace shorter-term notes. The yield on the 10-year Treasury note was steady at 4.73 percent from late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

Crude oil futures moved higher, but remain more than $2 per barrel lower from last Friday’s trading. A barrel of light crude settled at $60.47, up 45 cents, on the New York Mercantile Exchange.

Declining issues outnumbered advancers by nearly 9 to 7 on the NYSE, where volume came to 1.56 billion shares, compared with 1.77 billion traded on Wednesday.

The Russell 2000 index of smaller companies fell 3.56, or 0.49 percent, to 718.28.

Overseas, Japan’s Nikkei stock average surged 2.62 percent on the Japan central bank’s move. In Europe, Britain’s FTSE 100 was up 0.74 percent, France’s CAC-40 rose 0.77 percent for the session, and Germany’s DAX index gained 1.04 percent.