Stocks decline in U.S. as ECB overshadows jobless claims report

U.S. STOCKS retreated as disappointment over the European Central Bank’s efforts to tame the debt crisis overshadowed improving American employment data.
Posted 7/5/12

NEW YORK - U.S. stocks retreated, snapping a three-day advance for the Standard & Poor’s 500 Index, as disappointment over the European Central Bank’s efforts to tame the debt crisis overshadowed improving American employment data.

Financial shares had the biggest decline in the S&P 500 among 10 groups as Spanish and Italian bonds plunged. JPMorgan Chase & Co. and Bank of America Corp. dropped at least 2.6 percent. Equities pared losses as Apple Inc., the world’s most valuable company, rallied 2.2 percent. A measure of retailers in the S&P 500 jumped 1.1 percent amid June sales data.

The S&P 500 declined 0.2 percent to 1,370.87 at 1:21 p.m. New York time, paring an earlier loss of as much as 0.8 percent. The U.S. stock market was closed yesterday for a holiday. The Dow Jones Industrial Average dropped 13.40 points, or 0.1 percent, to 12,930.42. The Nasdaq Composite Index rose 0.2 percent to 2,982.26. Trading in S&P 500 companies was down 22 percent from the 30-day average at this time of day.

“There’s a bit of disappointment with the ECB,” said Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas. “In the U.S., the jobless claims figures were encouraging, but I don’t think they change the dynamics for tomorrow’s data. People are not willing to take big bets going into the jobs report.”

Equities fell as ECB President Mario Draghi said today’s cut in interest rates to a record low may have only a limited impact on the euro-area economy as it slides toward recession.

China also lowered rates today. Earlier gains were driven by data showing that fewer Americans than forecast filed jobless claims last week, while companies added more workers than estimated in June. Tomorrow’s jobs report may show the weakest quarter for employment in more than two years.

Economic concern

Concern about a global economic slowdown put the S&P 500 last month on the brink of a so-called correction, or a 10 percent decline from a recent peak. The index slumped 3.3 percent in the second-quarter, the biggest retreat since the period ending in September.

“China is slowing, Europe is clearly slowing, how is the U.S. going to avoid sliding into recession again?” said Malcolm Polley, who oversees about $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania. “There’s just not a lot of capacity left to add stimulus.”

Six out of 10 groups in the S&P 500 retreated as a measure of financial shares slumped 1.2 percent. JPMorgan lost 3.7 percent to $34.55. The bank was ordered by a federal judge in Washington to explain why it shouldn’t be compelled to turn over e-mails sought by the Federal Energy Regulatory Commission in a probe of potential energy-market manipulation. Bank of America slumped 2.6 percent to $7.85.

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