Market Slides in Mid August Swoon
Stocks tumbled Thursday after two disappointing economic reports renewed investors' concerns about the pace of a recovery. The Dow Jones industrial average fell about 165 points in afternoon trading. Broader indexes also fell by more than 1.5 percent. Interest rates also fell sharply as investors flocked to the safety of Treasury bonds.
The Labor Department said claims for unemployment benefits rose unexpectedly last week and the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region has dropped during August.
"The Philly Fed number was just awful," said Randy Frederick, director of trading and derivatives at Charles Schwab. "The jobs number was bad, but not as far off the mark as the Philly number."
The pair of economic reports followed news that Intel Corp. was acquiring McAfee Inc. The deal, valued at $7.68 billion, was not enough to offset the weaker economic readings.
The reports are the latest in a months-long string of conflicting readings on the economy. The reports have shown the pace of a rebound is slowing and that companies are skittish about adding new workers. That has hurt stocks on some days in recent weeks. It has also stoked fears about the economy falling back into recession.
At the same time, corporate announcements, including earnings reports for the past six weeks, have largely showed companies are doing well. Mergers and acquisitions activity is often considered a positive sign because it means companies are willing to spend money to expand their businesses and are confident that prospects are improving.
In afternoon trading, the Dow fell 165.90, or 1.6 percent, to 10,249.64. The Standard & Poor's 500 index fell 20.12, or 1.8 percent, to 1,074.04, while the Nasdaq composite index fell 38.84, or 1.8 percent, to 2,176.86.
About six stocks fell for every one that rose on the New York Stock Exchange, where volume came to 484.6 million shares.
Volume has been particularly light in recent weeks, even by summer standards, meaning many investors are still uncertain about the direction of the economy.
Joe Benanti, managing director at Rosenblatt Securities, said low volume is probably adding to the sell-off.
It's "probably taking trading a little to an extreme, more than it should," Benanti said about the light trading volume.
If economic reports over the coming months continues to show the economy is growing, even slowly, it could alleviate fears of a second recession. That, in turn, could bring many investors back into the stock market.
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