Stocks fell for a third straight day on Thursday as a discouraging report on jobless claims underlined the lack of progress in turning around the anemic labor market.
A weak revenue outlook from networking giant Cisco Systems Inc
The number of U.S. workers filing new claims for unemployment benefits rose by 2,000 in the latest week, sending claims to a nearly six-month high.
Bears have the upper hand today because claims were so much worse than expected, said Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles.
It adds to their case that we're not getting any jobs growth, which means people won't be able to spend and the economy won't be able to recover.
Cisco fell 9.5 percent to $21.46 and was the top drag on both the Dow and Nasdaq. The computer networking group reported fourth-quarter revenue that missed expectations and forecast first-quarter sales below consensus. Several analysts downgraded their view on the stock.
Concerns that tech spending would weaken was underscored by comments from Cisco Chief Executive John Chambers, who warned of unusual uncertainty about the economy.
Flam noted that Cisco's quarter included the month of July, in contrast to companies whose quarters ended in June. This means the company has an extra month of insight, and it was a month where economic activity slowed, something we could see echoed by others in the future.
The Dow Jones industrial average <.DJI> was down 64.93 points, or 0.63 percent, at 10,313.90. The Standard & Poor's 500 Index <.SPX> dipped 7.02 points, or 0.64 percent, at 1,082.45. The Nasdaq Composite Index <.IXIC> dropped 21.53 points, or 0.97 percent, at 2,187.10.
Semiconductor stocks weighed on the Nasdaq after Cisco's results and after BMO Capital Markets downgraded the sector to underperform on concerns about rising inventories. Chip stalwarts Intel Corp
Texas Instruments fell 2.1 percent to $24.45, while one semiconductor index <.SOX> fell 1.5 percent to 325.22. Technicians are watching to see if the index closes under 324, the low end of a recent trading range.
Thursday's 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 U.S. Federal Reserve.
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.
Food company Sara Lee Corp
On the upside, General Motors Co
(Editing by Jeffrey Benkoe)