Stocks drop after surprise jump in weekly claims for unemployment benefits

Stocks fall after spike in jobless benefits claims

NEW YORK — Stocks fell Thursday after first-time claims for jobless benefits rose unexpectedly last week.

The high unemployment rate in the U.S. remains one of the biggest worries for investors. The surprise jump in claims last week suggests that employers are still reluctant to create jobs, which could keep a damper on economic growth the coming months.

The Dow Jones industrial average fell 46 points in afternoon trading. Broader indexes also fell moderately.

The Labor Department said initial claims for unemployment benefits jumped to 479,000 last week from a 460,000 a week earlier. Economists polled by Thomson Reuters had forecast new claims would fall modestly to 455,000.

“The trend is going exactly in the wrong direction,” said Phil Orlando, chief equity market strategist at Federated Investors. However, he cautioned that layoffs of temporary census workers might have skewed results somewhat, and that’s why the market’s drop hasn’t been bigger following the report.

Traders will get a stronger reading on the jobs market on Friday when the government releases its closely watched monthly tally of payrolls and the unemployment rate. Investors have been getting mixed signals on the economy in recent weeks, and sent stocks higher on Wednesday after payroll company ADP reported that private employers slightly increased hiring last month.

In other news, monthly retail sales reports showed shoppers remain skittish about spending as hiring remains scarce. Costco Wholesale Corp. and Limited Brands Inc. both reported big jumps in July sales, but that was compared with weak results a year ago.

Department store J.C. Penney Co. reported a surprise drop in July sales and said profit would fall at the low end of its outlook. Teen retailers like The Buckle Inc. and The Wet Seal Inc. continue to struggle as consumers increase their savings rate.

“Without job creation, you can’t get consumer confidence up and spending up,” said Joe Gordon, founder and managing partner of Gordon Asset Management. “People are very cautious.”

In afternoon trading, the Dow Jones industrial average fell 46.09, or 0.4 percent, to 10,634.42. The Standard & Poor’s 500 index fell 5.38, or 0.5 percent, to 1,121.86, while the Nasdaq composite index fell 13.90, or 0.6 percent, to 2,289.67.

About three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 412.6 million shares.

Thursday’s jobless claims report added to a murky picture on the economy heading into the monthly employment survey. The Labor Department is expected to say private employers hired 90,000 workers in July, a slight increase from the 83,000 hired in June. But because of government layoffs tied to cutting temporary census jobs, the unemployment rate is expected to rise to 9.6 percent from 9.5 percent.

Tim Speiss of Eisner LLP’s Personal Wealth Advisors practice, said Friday’s report doesn’t have blow away expectations to reassure investors and ease concerns about slowing growth.

“Coming close to expectations will be sufficient,” Speiss said.

Stocks have alternated between gains and losses all week as economic reports vacillate between topping expectations and falling short of forecasts. The run continued Wednesday when major indexes rose moderately following the upbeat jobs report from ADP and a surprise increase in growth in the services industry.

Costco shares fell 98 cents to $56.42, while Limited Brands rose 11 cents to $26.15. J.C. Penney dropped $1.83, or 7.6 percent, to $22.13. Wet Seal fell 4 cents to $3.29 and The Buckle dropped $1.19, or 4.4 percent, to $26.02.

Bond prices climbed as investors opted for the safety of Treasurys. The yield on the 10-year Treasury note, which moves opposite to its price, fell to 2.91 percent from 2.96 percent late Wednesday. Its yield helps set interest rates on mortgages and other consumer loans.

Treasury yields are hovering near levels not seen since April 2009 when the stock market was just beginning its big rally.

Overseas, Britain’s FTSE 100 fell 0.4 percent, Germany’s DAX index rose less than 0.1 percent, and France’s CAC-40 rose 0.1 percent. Japan’s Nikkei stock average rose 1.7 percent.