NEW YORK – Stocks fell Thursday, with the Dow shedding almost 112 points, amid an unexpected jump in unemployment claims, a sharp rise in crude oil prices, and a disappointing forecast from General Motors Corp (GM).
The Dow Jones industrial average (search) fell 111.95 points, or 1.05 percent, to 10,505.83. The Standard & Poor's 500 Index (search) dropped 10.25 points, or 0.86 percent, to 1,177.45. The Nasdaq Composite Index (search) was down 21.97 points, or 1.05 percent, at 2,070.56.
The Dow and S&P closed at their lowest level in five weeks, while the Nasdaq was at its lowest in two months. It was the Dow's biggest one-day point drop since a loss of 115.64 points, or 1.09 percent, on Nov. 19. For the S&P 500 and Nasdaq, it was the biggest decline since Jan. 4.
General Motors, the world's largest car company and a Dow component, fell 2.8 percent after saying it expects earnings this year to fall, due in part to weaker profit from its financial-services arm. GM also pushed back a longer-term profit target.
Meanwhile, Verizon Communications Inc. (VZ), the largest U.S. telecommunications company, also weighed on the Dow, with its shares dropping nearly 3 percent, after several analysts lowered earnings estimates.
"I think the market's attention is focused on some of the headline macro issues. We've had some rebound in the energy market -- which is probably stirring fears of a return to $55 a barrel oil," said Christine Callies, managing director and chief market strategist, Bessemer Trust.
Also, economic data showing a large widening in the U.S. trade deficit in November, released Wednesday, were also "off-putting", said Callies.
Crude oil futures extended their gains, surpassing $48 per barrel and closing at a six-week high, as investors worried about declining U.S. reserves, the Iraqi elections and evidence of OPEC production cuts. A barrel of light crude was quoted at $48.04, up $1.67, on the New York Mercantile Exchange (search).
Wall Street also worried about the latest first-time jobless claims report, which showed a jump of 10,000 claims to 367,000 last week, a three-month high. After Friday's modest job creation report, the labor market remained a major concern for investors.
But while the markets held on with only modest losses through most of the day, General Motors' outlook — at the low end of Wall Street expectations — sent stocks tumbling.
"You get a little bad news, and there's nobody willing to step up and buy on the dip," said Bryan Piskorowski, market analyst at Wachovia Securities. "It's the same pattern we've seen nearly every day this year. Investors are being very conservative and playing this day-to-day. It's not new to the market that GM's robbing Peter to pay Paul, but it was enough to trigger some sell programs."
Mediocre economic data and surging oil prices, combined with continued investor unease about the profit outlooks for 2005, have overshadowed strong earnings reports this week from tech heavyweights Intel Corp. and Apple Computer Inc.
Apple (AAPL) jumped 6.6 percent, or $4.34 to $69.80, a day after reporting a quarterly profit that more than quadrupled on sky-rocketing sales of its iPod digital music players and strong demand for its PowerBook notebook PCs. Earlier, Apple's shares rose above $74, just short of an all-time high hit in March 2000 at the height of the tech bubble. But its gain wasn't enough to fuel the Nasdaq.
"These (earnings) numbers are unambiguously good, and you're seeing a nice runup in those stocks, but they aren't spilling over into the rest of the sector," said Russ Koesterich, U.S. equity strategist at State Street Corp. in Boston.
After the closing bell, Sun Microsystems Inc. (SUNW) fell nearly 7 percent on the Inet electronic brokerage system to $4.30 after it reported a small quarterly net profit, reversing a year-earlier loss, as costs narrowed even as revenue declined slightly. Sun closed trading during the ordinary session at $4.58, up 3 cents on the day.
Meanwhile, the Commerce Department's (search) December report on retail sales failed to impress investors. Sales rose 1.2 percent for the month, better than the 1.1 percent hike economists had forecast. However, taking auto sales out of the equation, retail sales rose just 0.3 percent, less than the 0.4 percent Wall Street expected.
Dow component GM (GM) fell after predicting 2005 earnings of $4 to $5 per share. Wall Street analysts had projected $4.78 per share. The outlook was disappointing given GM's projected earnings of $6 to $6.50 for 2004. General Motors fell 99 cents to $37.40.
Dow component Pfizer Inc. (PFE) lost 70 cents to $25.33 after the Food and Drug Administration warned that the company's advertising for pain medications Celebrex and Bextra were misleading due to unrealistic effectiveness claims. Celebrex, the arthritis drug, was shown in recent studies to increase the risk of heart complications.
Google Inc. (GOOG) introduced a new search program for small businesses, allowing entrepreneurs to add search capabilities to their Web sites for thousands of dollars less than Google's previous low-end offerings. Google nonetheless slipped 5 cents to $195.33.
A medical journal and the Defense Department have come to the defense of Taser International Inc.'s (TASR) non-lethal stun weapons. The Pacing and Clinical Electrophysiology Journal and the Pentagon said the weapons are safe to use. Taser surged $3.79, or 22.3 percent, to $20.80.
RadioShack Corp. (RSH), the No. 3 U.S. consumer electronics chain, said fourth-quarter sales at stores open at least a year rose 3 percent, and said its president, David Edmondson, would become chief executive.
Overall, trading was active, with 1.5 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 2.09 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year. Decliners outnumbered advancers on the NYSE by 6-to-5 and by 5-to-3 on Nasdaq.
The Russell 2000 index of smaller companies was down 3.06, or 0.5 percent, at 610.13.
Overseas, Japan's Nikkei stock average fell 0.83 percent. In Europe, Britain's FTSE 100 closed up 0.35 percent, France's CAC-40 gained 0.47 percent for the session, and Germany's DAX index climbed 0.08 percent.
Reuters and the Associated Press contributed to this report.