Stocks sink; oil hits new high for 2009
NEW YORK -- Stocks turned lower Thursday after a report on jobless claims gave mixed messages about the state of the economy.
Stocks rose early on but drifted lower by late morning as another increase in people receiving jobless benefits dented the market's recent burst of confidence, which has driven the Dow Jones industrial average up 14% over the past seven days.
Investors had initially cheered another part of the employment report, which showed the number of new initial claims for jobless benefits decreasing last week.
The number of initial requests for unemployment insurance last week dropped to a seasonally adjusted 646,000 from the previous week's revised figure of 658,000, which exceeded economists' estimates. But the number of people continuing to receive benefits set a new record for the eighth straight week, jumping 185,000 to a seasonally adjusted 5.47 million.
Analysts saw Thursday's decline as a slight pause to the enthusiastic buying that has marked the advance that began last week.
The S&P 500 index has jumped 17% over the past seven days, a remarkable feat considering that only a few weeks ago the market was trading at levels not seen in more than a decade.
"We've had a lot of very positive news that I believe has caught a lot of people by surprise," said Kent Engelke, managing director at Capital Securities Management in Glen Allen, Va.
Meanwhile, oil prices hit news highs for the year after a decision by the Federal Reserve to spend billions snapping up U.S. bonds sent the dollar tumbling.
Oil is priced in dollars and when the U.S. currency weakens, it essentially makes crude cheaper.
Benchmark crude for April delivery surged $3 to $51.14 a barrel in light trading on the New York Mercantile Exchange. Oil prices hit $52.25 earlier in the day, a price last seen on Dec. 1.
With the April contract set to expire Friday, most of the trading had shifted to the contract for May delivery. Crude prices on the May contract jumped $2.86 to $51.76 a barrel.
Stock and bonds both surged on Wednesday following news of the Fed move.
The effect of the actions will be to add hundreds of billions of dollars of new money into the financial system in an effort to break a logjam in lending and lower interest rates.
Eric Thorne, an investment adviser at Bryn Mawr Trust, said the Fed's moves show that the government is willing to take bold actions to restore confidence in the financial system. "The biggest piece we're missing is the general confidence," Thorne said.
The Fed's actions are expected to make it less expensive for consumers to borrow for everything from homes to cars to credit cards.
On Thursday, mortgage finance giant Freddie Mac said average rates on 30-year fixed-rate mortgages dropped to 4.98% this week — the lowest level since January. Rates are poised to continue falling.
In corporate news Thursday, FedEx fdx said it plans to cut more jobs and trim wages again, as the company reported its fiscal third-quarter profit tumbled 75%. The shipping company is often seen as a bellwether for the economy.
Citigroup c announced plans to increase the number of its common shares outstanding and execute a reverse stock split. News that the bank had been profitable in the first two months of the year sparked the market rally that began last week.
Bond prices mostly fell, a day after steep gains because of news from the Fed.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.52% from 2.50% late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.21%, from 0.20% late Wednesday.
The dollar fell against other major currencies, while gold prices rose.
Overseas, Japan's Nikkei stock average fell 0.3%. In afternoon trading, Britain's FTSE 100 was rose 2.3%, Germany's DAX index gained 2.7%, and France's CAC-40 rose 1.1%.