NEW YORK – Stocks declined for a second straight session Thursday as Wall Street grew nervous ahead of the government's November jobs creation report and its implications for the health of the overall economy.
The skittishness came despite upbeat news from the Labor Department, which said, as expected, that the number of newly laid off workers seeking unemployment benefits fell last week by the largest amount in six months. A spike in jobless claims last week stirred concern among investors that perhaps the economy was losing steam too quickly. Fluctuations tend to be wider around the holidays and Friday's Labor Department report should provide some clarity about the labor market.
Wall Street hopes the job market will hold up well enough to safeguard consumer spending, though investors also are concerned that high employment levels will make it more expensive for businesses to hire and retain workers. As the Federal Reserve has said it remains vigilant about inflation, a rise in the cost of hiring and retaining workers could make it harder for the central bank to justify a cut in short-term interest rates.
Nicholas Raich, director of equity research at National City Investments' private client group, contends that while Thursday's jobs data and other economic findings seem to suggest an economic soft landing is in the offing, some investors are nevertheless looking to cash in some of their gains, thinking the market has topped out. "We think the market is moving closer to fair value," he said.
The Dow Jones industrial average fell 30.84, or 0.25 percent, to 12,278.41.
Broader stock indicators also fell. The Standard & Poor's 500 index remained near a six-year high but was down 5.61, or 0.40 percent, to 1,407.29, and the Nasdaq composite index fell 18.17, or 0.74 percent, to 2,427.69.
Weakness in energy, consumer discretionary and technology stocks added to overall selling pressure.
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.49 percent from 4.48 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose 30 cents to $62.49 a barrel on the New York Mercantile Exchange.
Raich said the latest job figures show the economy to be resilient. "It's in a great spot right now in that it's not too strong and not too weak."
He contends the data suggest the economy can pull off a soft landing rather than slowing too quickly and tipping into recession. Investors are looking to Friday's job creation number to gain further insight into whether such a gradual slowdown will occur. A continuation of robust consumer spending as important as it accounts for two-thirds of economic activity and has helped propel the economic expansion of recent years.
Analysts are expecting Friday's unemployment figure for November will total about 105,000.
Wall Street was pleased when the Labor Department report met expectations. The agency said jobless claims filed last week fell to 324,000, down 34,000 from the previous week. The decline had been expected by economists who regarded the previous week's jump as an anomaly.
In corporate news, Vanda Pharmaceuticals Inc. surged $10.65, or 69 percent, to $26.15, after the company reported an experimental schizophrenia treatment proved effective in a late-stage clinical trial.
Weakness in Apple Computer Inc. (AAPL) shares hurt technology stocks. The company fell $2.79, or 3.1 percent, to $87.04 after a CIBC World Markets analyst warned he contends a widely expected mobile phone offering from the company could come to market later than some on Wall Street had expected.
Home Depot Inc. (HD) was the weakest of the 30-stock Dow index, falling 99 cents, or 2.5 percent, to $38.93 after it reported $200 million in unrecorded stock option expenses over a 26-year period.
Pharmaceutical company Eli Lilly and Co. (LLY) fell 87 cents to $53.99 after the company said its pending acquisition of Icos Corp. will shave 10 cents per share off its 2007 profit, though it predicts the deal will add to sales starting in 2008.
Auxilium Pharmaceuticals Inc., a specialty drug maker, temporarily halted a late-stage clinical trial to investigate a manufacturing issue. The trial is for an injectable enzyme to treat Dupuytren's contracture, an abnormal thickening of tough tissue in the palm and fingers that can cause the fingers to curl. The stock fell $1.49, or 9.3 percent, to $14.47.
Advance Auto Parts Inc. rose $1.09, or 3 percent, to $37.01 after a Citigroup analyst raised his rating on the auto parts retailer to "Buy" from "Hold" in part due to the possibility for reinvigorated profit growth.
The Russell 2000 index of smaller companies was down 3.65, or 0.46 percent, at 792.29.
Declining issues outpaced advancers 3 to 2 on the New York Stock Exchange, where volume came to 1.45 billion shares compared with 1.53 billion shares traded Wednesday.
Overseas, Japan's Nikkei stock average closed up 0.62 percent. Britain's FTSE 100 closed up 0.68 percent, while Germany's DAX index rose 0.68 percent, and France's CAC-40 was up 0.53 percent.