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News >  Business

Stocks fall on fresh worries about economy

Associated Press
NEW YORK — Caution returned to Wall Street on Thursday as weak earnings reports and record unemployment claims offered the latest evidence of the economy’s struggles. Stocks fell sharply after soaring Wednesday on hopes the government will develop a way to remove bad debt from banks’ books. All the major indexes lost more than 1 percent Thursday. Some pullback was to be expected after the Standard & Poor’s 500 index put up its first four-day advance since November. Investors’ mood darkened after companies from Eastman Kodak Co. to chip maker Qualcomm Inc. reported that profits tumbled the final three months of 2008. And the government said Thursday the number of people drawing unemployment benefits reached a record this month. The Labor Department reported that the number of Americans continuing to claim unemployment insurance for the week ending Jan. 17 rose to a seasonally adjusted 4.78 million, the highest on records that go to 1967. As a proportion of the work force, the total is the highest since August 1983. Companies from a variety of industries have been slashing their payrolls by the thousands — and Starbucks Corp. late Wednesday became the latest employer to announce big layoffs. The coffee retailer, after posting a two-thirds drop in earnings, said it plans to cut nearly 7,000 more jobs as it closes stores. “It seems like we’ve gotten through the financial crisis. Now we’re dealing with global synchronized recession,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. In other economic data Thursday, the Commerce Department said orders to U.S. factories for big-ticket manufactured goods fell for the fifth straight month in December, and that home sales plunged 14.7 percent to an adjusted annual rate of 331,000 in December. In midday trading, the Dow industrials fell 115.73, or 1.38 percent, to 8,259.72. Broader stock indicators also sank. The S&P 500 index fell 16.55, or 1.89 percent, to 857.54, and the Nasdaq composite index fell 28.55, or 1.83 percent, to 1,529.79. On Wednesday, the Dow jumped 201 points, or 2.5 percent, while broader indexes rose more than 3 percent. Investors snapped up financial stocks following media reports the Obama administration was considering creating banks to absorb the bad assets weighing down the financial system. Bond prices fell Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.68 percent from 2.67 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.19 percent from 0.17 percent Wednesday. The Russell 2000 index of smaller companies fell 9.18, or 1.94 percent, to 463.84. The number of stocks falling outpaced advancers by nearly 4-to-1 on the New York Stock Exchange. Trading volume came to 407.7 million shares. The dollar was mixed against other major currencies, while gold prices fell. Light, sweet crude fell 87 cents to $41.29 a barrel on the New York Mercantile Exchange. Among companies turning in results, Kodak fell $1.55, or 22 percent, to $5.52 after it reported a $137 million fourth-quarter loss on a big drop in sales of both digital and film-based photography products. The company said it is cutting 3,500 to 4,500 jobs, or 14 percent to 18 percent of its work force. Qualcomm fell $2.68, or 7.3 percent, to $34.14 after reporting a steep drop in its earnings and slashed its forecast. The company is one of the world’s largest suppliers of chips for mobile phones and has seen demand fall as its customers trim inventories. Starbucks rose 9 cents to $9.74. Black & Decker Corp. tumbled $5.67, or 15 percent, to $33.07 after reporting that its fourth-quarter earnings dropped 77 percent. The maker of power tools forecast first-quarter earnings far below what Wall Street had been expected. Ford Motor Co. said it lost $5.9 billion in the fourth quarter but that it has no plans to seek federal aid unless economic conditions worsen. The second-largest U.S. automaker said it reached an agreement with the United Auto Workers to end the jobs bank in which laid-off workers get most of their pay. The union has already agreed to do so with General Motors Corp. and Chrysler LLC. Ford fell 4 cents, or 2.1 percent, to $1.99. Investors weren’t disappointed in all the results. Consumer products company Colgate-Palmolive rose $3.03, or 4.8 percent, to $66.87 after reporting its fourth-quarter earnings rose nearly 20 percent because of cost cuts, higher prices and new products. Continental Airlines Inc. rose 35 cents, or 2.2 percent, to $16.58 after reporting it lost $266 million in the fourth quarter as the recession eroded demand for air travel. The results were better than Wall Street had expected. Overseas, Japan’s Nikkei stock average rose 1.79 percent. In afternoon trading, Britain’s FTSE 100 fell 2.41 percent, Germany’s DAX index fell 1.86 percent, and France’s CAC-40 fell 1.92 percent.
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