US stocks slide most in three months on recovery concern
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U.S. stocks was hit with the steepest slide in three months on Thursday, the first day of the fourth quarter, after disappointing unemployment and manufacturing reports left investors worried about economic recovery.
Dow Jones Industrial Average shed 203 points, the biggest point and percent drop since July 2, and all 30 stocks closed lower on Thursday. Dow was down for three straight days and six of last seven.
The Standard & Poor's 500 Index slid 2.58 percent to 1,029.85 a day after capping its biggest back-to-back quarterly rally since 1975. About 18 stocks fell for each that rose on the New York Stock Exchange, the broadest sell-off since April.
The stocks were pushed lower after the Institute for Supply Management said its index of manufacturing activity in September slipped to 52.6 from 52.9 in August, missing analysts' expectations of 54. Figures above 50 indicate the sector is expanding.
More pressure came with the weekly jobless application report. The U.S. Labor Department said new claims for unemployment benefits rose last week to 551,000. Economists polled by Thomson Reuters had predicted a total of 535,000 claims.
The increase broke a string of three straight weekly drops and exacerbated the concerns about the monthly employment report, which is due on Friday.
Currently, U.S. unemployment rate stands at 9.7 percent, highest level in 26 years. But economists predicted the rate will rise to 9.8 percent in September. Most analysts expect the rate to top 10 percent by early next year. Economists are hoping the pace of job cuts will slow, however. Employers are expected to have cut 180,000 jobs in September compared with 216,000 in August.
The disappointing economic reports have cast shadow on investors' prospect on the strength of the recovery and the sustainability of the equity market rally. Even the news about U.S. consumer spending's surge failed to lift the market.
The U.S. Commerce Department reported on Thursday that consumer spending rose 1.3 percent in August, the largest rally in nearly eight years. But analysts remained conservative about the rebound as rising unemployment and tight credit conditions would curb the upward trend.
Falling auto sales report on Thursday added to investors' concern on a sustainable recovery. Major automakers posted big drops in September sales following the government's Cash for Clunkers incentive program.
General Motors Co. and Chrysler Group LLC reported the biggest slowdowns during the month. GM's sales plunged 45 percent to 155, 679 vehicles in September, compared with a year earlier. Chrysler sold only 62,197 vehicles last month, down 42 percent.
Ford Motor Co. had the smallest decline among major manufacturers, falling 5.1 percent to 114,241. Japan's Toyota Motor Corp. said sales fell 13 percent while Nissan Motor Co. said its sales fell 7 percent. Honda's sales fell 23.3 percent to 77, 229.
Meanwhile, technology sector met a heavy sell-off on Thursday after Microsoft fell 3.3 percent to 24.88 U.S. dollars. Goldman Sachs lowered the world's largest software company from " conviction buy" to "buy," citing "some degree of risk to" first- quarter earnings.
The Dow Jones lost 203.00, or 2.09 percent, to 9,509.28. Broader indexes also fell sharply. The Standard & Poor's 500 index dropped 27.23, 2.58 percent, to 1,029.85 and the Nasdaq declined 64.94, or 3.06 percent, to 2,057.48.
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