Stocks retreat after rally
The recent winning streak hits a snag amid wrangling over stimulus, continuing wave of job cuts and weak economic reports.
NEW YORK†(CNNMoney.com) -- Stocks tumbled Thursday morning, retreating after a four-day rally for the S&P 500, as bleak reports on the labor market and the manufacturing sector sparked a broad-based selloff.
The Dow Jones industrial average (INDU) lost 92 points, or 1.1%, in the early going. The Standard & Poor's 500 (SPX) index lost 13 points, or 1.5%, and the Nasdaq composite (COMP) lost 26 points, or 1.7%.
The Dow soared for the third-straight session Wednesday while the S&P 500 and Nasdaq rose for the fourth session in a row. Stocks were lifted by efforts the Obama administration and Federal Reserve are taking to tackle the credit crisis.
But the gains proved unsustainable Thursday morning, amid the most recent wave of weak quarterly earnings and economic reports.
Stimulus bill: Late Wednesday, the House approved an $819 billion stimulus bill aimed at jump-starting the economy. The Senate is likely to take up the bill next week. (Full story)
But Art Hogan, chief market strategist at Jefferies & Co., said that uncertainty surrounding Republican opposition to the package is part of the reason why the market is set to slump today.
"When we saw that the House passed the stimulus package and we're back to partisan politics as usual, that's discouraging," said Hogan.
Economy: Hogan added that the three economic readings represented a "trifecta of negative catalysts" that is weighing heavily on the markets.
The Labor Department reported that initial jobless claims increased to 588,000 in the week ended Jan. 24, from the revised figure of 585,000 the prior week. This is worse than the 575,00 claims that were forecast by a consensus of economists, compiled by Briefing.com.
The government also reported that durable goods orders, an important measure of manufacturing, dropped 2.6% in December, compared to a 1.5% decline the prior month. This is worse than the 2.2% decline that was forecast by a consensus of economists, according to Briefing.com.
The new home sales report for December is scheduled for 10 a.m. ET and is expected to fall to an annual rate of 400,000, the lowest figure since 1982, according to a consensus of economist opinion from Briefing.com. This would be down, slightly, from the November rate of 407,000.
Corporate results: Ford Motor (F, Fortune 500) reported a fourth-quarter net loss of $5.9 billion, or $2.46 per share. That's compared to a year-ago net loss of $2.8 billion, of $1.33 per share. The company also said it did not need government help and had reached an agreement with the United Auto Workers to end its job pool. Shares fell 3% in early trading.
Drugmaker Eli Lilly (LLY, Fortune 500) reported that fourth-quarter sales of $5.2 billion were flat compared to the year-earlier quarter. The company reported a net loss of $3.6 billion, or $3.31 per share, stemming from its acquisition of ImClone. Excluding charges, Lilly reported a profit of $1.07. Shares fell 1%.
Job cuts: Photo products maker Eastman Kodak (EK, Fortune 500) said Thursday that it will cut 2,000 to 3,000 more jobs in 2009, bringing to 3,500 to 4,500 the number of positions it will eliminate this year. The total job losses will amount to between 14% and 18% of its staff, the company said.
World markets: Markets in Asia soared, boosted by the upbeat sentiment on Wall Street Wednesday. Hong Kong's Hang Seng index rallied nearly 5%. But the mood didn't carry over to Europe, where major indexes tumbled in afternoon trading.
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