Wall Street drops on jobless numbers
US stocks ended down for a third straight day yesterday as an unexpected rise in jobless claims and a sobering revenue outlook from Cisco underscored the hurdles to economic recovery.
The drop comes a day after all three major indexes posted their worst percentage declines in more than a month, erasing gains for the year in the aftermath of a gloomier outlook from the US Federal Reserve.
The Dow Jones industrial average slipped 58.88 points, or 0.57 percent, to 10,319.95. The Standard & Poor’s 500 Index dropped 5.86 points, or 0.54 percent, to 1,083.61. The Nasdaq Composite Index tumbled 18.36 points, or 0.83 percent, to 2,190.27.
Cisco Systems fell 9.6 per cent to $21.45 and was the top drag on both the Dow and Nasdaq a day after it forecast sales below consensus, prompting several analysts to downgrade the stock.
The number of US workers filing new claims for unemployment benefits unexpectedly rose to nearly a six-month high, increasing ongoing fears about the weak labour market. It was the second straight week of increases.
Concerns that tech spending would weaken were underlined by comments from Cisco’s influential chief executive John Chambers, who warned of “unusual uncertainty” about the economy.
“The market is upset by all the uncertainty created by the forecast, and that’s weighing on the whole sector,” said Janna Sampson, co-chief investment officer at OakBrook Investments.
Telecom stocks advanced, with the S&P telecom services sector up 0.9 per cent and Verizon, up 2.5 per cent at $30.31, providing the biggest boost to the Dow. The sector is generally considered a defensive play.
Semiconductor stocks added to the Nasdaq’s losses after BMO Capital Markets downgraded the sector, along with stalwarts Intel and Texas Instruments, on concerns about rising inventories.
Texas Instruments shares lost 2.2 per cent to $24.41.
The S&P 500 fell below its 50-day moving average of 1,088, breaking a key technical support level that could exacerbate the sell-off.
“All of this – Cisco, the jobless claims – is feeding into the market’s correct conclusion that the economy is getting worse,” said Chip Hanlon, president of Delta Global Advisors.
After the closing bell, Nvidia Corp shares rose 6 per cent to $9.50 in extended trading after the graphics chipmaker reported its second-quarter results and gave a third-quarter revenue outlook.