Unemployment claims, Europe worries send stocks lower; September rally in doubt

Stocks weaken on Europe worries and job numbers

NEW YORK — Stocks fell Thursday as new worries emerged about Europe’s economy and the U.S. job market.

Stock indexes pared some of their losses but were still down in afternoon trading. The market got off to a bad start following an unexpected increase in unemployment benefits claims last week and more signs of weakness in the European economy.

The Dow Jones industrial average fell 44 points in afternoon trading after being down as much as 94 shortly after the opening bell.

Traders were disappointed to see first-time unemployment claims rise last week, breaking a recent trend of declines. The Labor Department said claims jumped by 12,000 and are still at levels that signal employers are not significantly adding new jobs. Economists polled by Thomson Reuters had forecast claims would remain unchanged.

Unemployment claims had fallen consistently in recent weeks, reducing worries that the economy might fall back into recession. Modest improvements in many economic reports have driven stocks sharply higher in September. The Dow Jones industrial average rose 13 of the past 16 days, but broke a five-day winning streak on Wednesday.

European markets fell and the euro dropped against the dollar after a closely watched reading on business activity in the 16 countries that use the euro weakened more than expected. It was the latest sign of trouble in Europe, which investors had largely stopped worrying about since a debt crisis in Greece eased this spring. Adding to the gloom was news that Ireland’s economy contracted 1.2 percent in the second quarter.

The Dow Jones industrial average fell 43.93 or 0.4 percent, to 10,695.38 in afternoon trading.

The Standard & Poor’s 500 index fell 6.01, or 0.5 percent, to 1,128.27, while the Nasdaq composite index fell 3.38, or 0.1 percent, to 2,331.17.

Stocks erased some of their losses on news that home sales climbed back from 15-year lows in August and an index of future economic activity rose more than expected. After trading mixed for much of the day stocks turned lower in the late afternoon.

Falling stocks outpaced rising ones two to one on the New York Stock Exchange, where volume came to 600 million shares.

The yield on the 10-year Treasury note, a widely used benchmark for consumer and business loans, rose to 2.56 percent from 2.55 percent late Wednesday.

Overseas, Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index dropped 0.4 percent, and France’s CAC-40 fell 0.7 percent.