Stocks slump as economy woes overhang

By IBTimes Staff Reporter | August 26 2010 7:24 PM

U.S. stocks sagged on Thursday as data that showed weekly initial jobless claims fell more than expected failed to stir much enthusiasm over the economy.

Sponsorship Link

At the same time, central bankers from around the world met for their annual retreat, prepared to address problems rising from a darkening economic outlook.

Wall Street initially rose after the Labor Department data, but the first-time claims for jobless benefits remained too high to signal a shift in the weak labor market. As well, the four-week average of new claims, regarded as better reflecting trends, rose to the highest since late November.

What we want to see is 450,000 or 460,000 for initial claims, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco. Claims for last week fell to 473,000.

But these are still numbers that are not associated with growth in the economy.

Investors were also wary ahead of Friday morning's release of a second reading of U.S. gross domestic product in the second quarter.

The Dow Jones industrial average <.DJI> fell 77.77 points, or 0.77 percent, to 9,982.29. The Standard & Poor's 500 Index <.SPX> shed 8.29 points, or 0.79 percent, to 1,047.04. The Nasdaq Composite Index <.IXIC> lost 22.40 points, or 1.05 percent, to 2,119.14.

All of the S&P 500 10 major sectors were negative, led lower by declines in energy and technology shares. A drop in shares of coal companies weighed on the energy sector for a second day as the price of natural gas fell to an 11-month low, raising concerns that power plants would switch to gas from coal. Massey Energy fell 4.5 percent to $27.84, while the S&P energy sector <.GSPE> fell 1.1 percent.

Big-cap tech shares were among the decliners, including Cisco Systems , which fell 2.2 percent to $20.75, while Intel gave up 1.7 percent at $18.16.

The preliminary GDP reading is expected to show a meager rise of 1.4 percent, compared with a 2.4 percent rise estimate one month ago. Estimates range broadly from 0.9 percent to 2.2 percent, according to a Reuters poll.

Federal Reserve Chairman Ben Bernanke in a speech on Friday in Jackson Hole, Wyoming, is likely to discuss the uncertain prospects for the economy but isn't expected to give many clues about whether the U.S. central bank will pump more cash into the economy to keep the recovery going.

(Reporting by By Leah Schnurr; Editing by Kenneth Barry)