NEW YORK — Stocks slumped Thursday as upbeat labor market data was eclipsed by interest rate worries, lackluster retail sales and a stern warning about the nation’s budget deficit from Federal Reserve Chairman Alan Greenspan.
Continuing a now weekslong pattern, Wall Street fell on good economic news that it believed would motivate the Fed to raise rates. The Labor Department reported that the number of people filing new claims for unemployment insurance fell last week to the lowest level since October 2000, a far greater decline than analysts had anticipated.
The drop added to the market’s suspense about the government’s monthly jobs report scheduled for release Friday.
“The unemployment claims are fueling speculation that (today’s) numbers may be better than expected, so that raises the question about when the Fed will pull the trigger on rates,” said Peter Cardillo, chief strategist with S.W. Bach & Co. “So the bears have taken full control.”
The Dow Jones industrial average shed 69.69, or 0.7 percent, to 10,241.26, but was well off the lows of the session.
The broader gauges were also lower. The Nasdaq composite index sank 19.52, or 1 percent, to 1,937.74. The Standard & Poor’s 500 index fell 7.54, or 0.7 percent, to 1,113.99.
Rising oil prices, apprehension over the U.S. campaign in Iraq and the prospect of higher rates have overshadowed positive economic data and strong corporate earnings.
While Wall Street has assigned a great deal of significance to the expected hike, most analysts agree it will not have a lasting negative impact on stock prices or economic activity because rates currently stand at 46-year lows. Nonetheless, predictions that the Fed could take action as early as June have made the market jittery.
Contributing to investors’ anxiety, Greenspan told a banking conference Thursday the federal budget deficit could represent a major obstacle to long-term economic stability. The deficit will amount to 4.25 percent of the total economy after it climbs to an estimated $500 billion this year.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.