Stocks waver, a day after biggest rally in 2 years
NEW YORK—A rally that drove major stock indexes up 7 percent this week stalled Thursday. Stock indexes ended slightly lower, a day after the market posted its biggest gain in two and a half years.
The Dow Jones industrial average fell 25.65 points, or 0.2 percent, to close at 12,020.03. Travelers Cos. Inc. lost 2.2 percent, the biggest drop of the Dow's 30 stocks. Boeing Co. had the biggest gain, 3.3 percent.
The Dow soared 490 points Wednesday, its seventh-best gain on record, on news that central banks around the world slashed borrowing costs for banks in order to shore up the European financial system and prevent the region's debt crisis from getting worse.
If a major European bank were to fail or if one or more countries defaulted, investors fear it could result in a freeze-up in global lending markets like the one that occurred in 2008 when Lehman Brothers collapsed.
Another rise in applications for weekly unemployment benefits dampened the mood Thursday. The Labor Department said initial applications rose to 402,000 last week, the second weekly increase in a row. The figures didn't change expectations for the government's monthly labor report, which comes out Friday. Economists forecast that the unemployment rate will remain at 9 percent.
The S&P 500 index slipped 2.37, or 0.2 percent, to 1,244.59. The Nasdaq inched up 5.86, or 0.2 percent, to 2,626.
Investors often turn cautious following giant leaps, said Sam Stovall, chief equity strategist at S&P Capital IQ. The Dow shot up 813 points in the first three days of the week as fears ebbed that Europe's debt crisis would turn into a global panic. Another trigger for the rally that started Monday was news that a record number of shoppers went to stores over the Thanksgiving weekend.
"It's almost like rooting for a football team that won by a very big score," Stovall said. The next day, people are likely wondering whether the big victory was a one-off event or the start of a lasting trend.
"Lately, it seems like nothing lasts that long," Stovall said. News out of Europe has sent stocks swinging from large gains to deep losses. One week ago, the S&P 500 was down 7.9 percent for the year. The index is now within 13 points of breaking even.
Daily moves in the S&P 500 index have been three times more volatile in the past 13 weeks compared with the long-term average, Stovall said. Since 2000, the S&P 500 index moved up or down by 2 percent an average of 14 days every three months. Over the past 13 weeks, that's happened 45 times.
Traders took little encouragement Thursday from a better manufacturing report. The Institute for Supply Management said that manufacturing grew last month at the fastest pace since June.
The euro inched higher against the dollar as investors became less fearful about Europe's financial problems. Borrowing rates for France and Spain eased after both countries had successful auctions of new debt.
In corporate news:
-- Kohl's Corp. slumped 6.4 percent. The department store chain reported that a key revenue measure dropped sharply in November and fell far below Wall Street forecasts. Sales at stores open at least a year fell 6.2 percent; analysts had expected an increase.
-- Barnes & Noble dropped 16 percent after the bookseller posted a third-quarter loss instead of the slight profit analysts had expected. Sales also fell below analysts' estimates.
-- Finisar Corp. lost 12 percent after the maker of fiber-optics components reported revenue that was lower than analysts were expecting.