A drop in weekly unemployment claims and signs of economic strength in a Federal Reserve report were not enough to overcome disappointment over some key earnings reports as stocks slumped to heavy losses today.
Tech stocks were especially hard hit, despite strong earnings from Yahoo after markets closed yesterday. The Nasdaq lost 32.54 points, or 1.54 percent, to close at 2,073.59. The Dow lost 88.82 points, or 0.84 percent, to finish at 10,539.97. The S&P closed at 1,184.63, a loss of 11.54 points, or 0.95 percent on the day.
Economic Indications
The down session came after the first back-to-back positive trading days of the New Year and was sparked by earnings reports from the likes of J.P. Morgan Chase, which missed targets. Even IBM’s results, which exceeded both profit and revenue forecasts, were being called unimpressive by some analysts.
Investors looked past a rash of favorable economic news to sell off stocks.
The Commerce Department reported that new housing starts rebounded in December, climbing 10.9 percent for the month and rising 5.7 percent for the year, the fourth straight year of expansion in the housing sector.
Also, new claims for unemployment benefits fell substantially last week, dropping to 319,000 as the index posted the largest one-week decline in new filings in more than three years.
Expansion Seen
Additionally, the Federal Reserve said in its Beige Book of economic conditions that 11 of the 12 Fed districts saw expansion in the November to January time frame, with only the Cleveland district reporting mixed results.
Even a report that showed consumer prices rose 3.3 percent in 2004, the fastest growth in four years, was muted when the Labor Department also reported that retail prices actually fell 0.1 percent in December, aided by a drop in oil and gasoline prices.
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