US stocks drop after weak economic data

US stocks drop after weak economic data

New York: US stocks fell on Thursday after worse-than-expected unemployment and tame inflation data raised concerns about the strength of the economic recovery.

The Dow Jones Industrial Average dropped 50.49 points (0.49%) to 10,358.97 at 1636 GMT.

The tech-rich Nasdaq index shed 7.71 points (0.33%) at 2,298.22 and the broad-market S&P 500 index slid 4.70 points (0.42%) to 1,109.91.

Wall Street bias had been on the upside after a successful Spanish bond auction that eased fears the eurozone country was heading for a Greek-style debt crisis, analysts said.

But the market optimism proved short-lived after official US economic data disappointed.

“The initial verdict wasn’t a good one," the analysts said in a note to clients.

New claims for jobless insurance benefits rose for the second straight week, the Labour Department reported, dashing analyst expectations they would fall.

Claims climbed to 472,000 in the week to 12 June, an increase of 12,000 from the previous week’s revised figure of 460,000, it said.

“These numbers do not reveal a strengthening labour market. Instead they suggest that businesses remain cautious about future consumer demand. Furthermore, the claims data fit the view that the recovery in the labour market will be a protracted one," the analysts said.

In a separate report, the Labour Department said consumer prices fell for the second straight month in May, by 0.2%, due to falling energy prices. The average analyst forecast was for a 0.1% decline.

A Federal Reserve report on manufacturing in the Philadelphia region also missed market expectations. The Philadelphia Fed’s index plunged sharply in June, far more than analysts expected.

“The headline index had been running well above most of the component indices for several months, and June’s correction brings it more in line with the new orders index," said Nicholas Tenev of Barclays Capital Research.

Among stocks in focus, BP extended gains from the prior day as its chief executive Tony Hayward testified before lawmakers about the company’s massive oil spill in the Gulf of Mexico.

Shares in the beleagured British oil giant that are traded in New York climbed 0.78% to $32.10.

On Wednesday they gained 1.43% after BP said it would pay $20 billion into an escrow fund to compensate spill victims and suspended its dividend this year.

Northrop Grumman rose 0.38% to $61.31. The leading defense contractor announced a $2 billion share buyback program, representing about 11% of the firm’s capitalization.

Internet firm AOL slipped 0.49% to $22.17. Private US investment fund Criterion Capital Partners confirmed it was buying AOL’s social networking site Bebo, without disclosing financial details.

Several US media reports on Wednesday said the sale was in the works, and Bebo would be sold for a fraction of what AOL paid for it two years ago.

The action came after a nearly flat session Wednesday. The Dow rose 0.05%, the Nasdaq was virtually unchanged and the S&P 500 dipped 0.06%.

Bond prices rose. The yield on the 10-year Treasury bond dropped to 3.185% from 3.282% on Wednesday, while that on the 30-year Treasury bond fell to 4.115% from 4.20%. Bond prices and yields move in opposite directions.