Stock futures decline after rise in jobless claims

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June 25, 2009

Anonymous The Salem News Thu Jun 25, 2009, 10:02 AM EDT

NEW YORK (AP) — An unexpected rise in jobless claims is causing investors to sell again.

A day after the Federal Reserve expressed confidence in the economy, the government said new jobless claims rose by 15,000 to 627,000 last week. The market expected a decline, and stock futures fell ahead of the market's open on Thursday. Unemployment affects many drivers of the economy — most importantly, consumer spending.

Uncertainty about when the economy will turn around, and how fast it will grow when it finally does, have made for a rocky market this month. The Dow Jones industrial average remains up 26.8 percent from its 12-year low hit on March 9, but is down nearly 500 points, or 5.7 percent, from the five-month high it reached on June 12.

Rising unemployment claims shouldn't be surprising to investors, because unemployment usually continues to increase even when the economy is improving, said Arthur Hogan, chief market analyst at Jefferies & Co. But the jump in claims was nevertheless leading to some selling on Thursday, he said.

"Investors are really on guard here. We're at a juncture where investors don't know what the next 10 percent move is — whether it's up or down," Hogan said.

The Fed said on Wednesday that "sustainable economic growth" should gradually resume, and inflation will "remain subdued for some time." The statement did little to reassure investors, though, causing stocks to give up gains and finish mixed. Some were hoping the central bank would articulate how it will curb inflation.

One piece of good news on Thursday was a slightly improved reading on gross domestic product. First-quarter GDP shrank 5.5 percent, the Commerce Department said, less than the previous estimate of 5.7 percent.

Before the market's open, Dow futures fell 46, or 0.6 percent, to 8,210. Standard & Poor's 500 index futures fell 7.10, or 0.8 percent, to 891, and Nasdaq 100 index futures fell 7.75, or 0.5 percent, to 1,439.5.

Asian markets rose, while European markets fell.

Government bond prices edged up after the economic data, and ahead of the last big Treasury auction of the week: $27 billion in seven-year notes.

Most auctions have been attracting solid demand so far this year, but investors are looking for signs of weakness. If demand wanes, the government will have to boost yields sharply to lure buyers. Treasury yields affect consumer borrowing rates.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.67 percent from 3.69 percent late Wednesday.

In corporate news, Nike Inc. reported late Wednesday that its profit dropped in its fiscal fourth quarter on costs to cut jobs. Adjusted results beat Wall Street expectations, but the athletic footwear and apparel company said orders for the next several months are down significantly from last year.

Nike shares fell about 4 percent in premarket trading.

Hertz Global Holdings Inc. on Thursday predicted second-quarter and full-year earnings above Wall Street estimates, driving the rental car chain's shares up about 9 percent in premarket trading.

Crude oil rose 9 cents to $68.76 a barrel in premarket trading on the New York Mercantile Exchange.

The dollar was mixed against other major currencies.

Overseas, Japan's Nikkei stock average rose 2.2 percent. In afternoon trading, Britain's FTSE 100 fell 1.1 percent, Germany's DAX index fell 1.9 percent, and France's CAC-40 fell 1.8 percent.

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