Stocks in the U.S. got body-slammed Thursday as grim sales reports from the retail sector and rising unemployment claims bulked up investor pessimism.
All three major indices ended with 3% losses. The Dow Jones Industrial Average plummeted 344.65 points to 11,188.23, and the S&P 500 lost 38.16 points to 1236.82. The Nasdaq stumbled 74.69 points to 2259.04.
The day's docket included a hefty serving of additional economic information. Automatic Data Processing's August employment figures showed private payrolls down 33,000, a slightly wider decline than estimates. The Department of Labor's jobless claims for the week ended Aug. 30 came in at 444,000, higher than expectations for 420,000 new claims.
The Labor Department's second-quarter productivity increased at an annual rate of 4.3%, ahead of estimates of 3.5% and up from 2.2% in the first quarter. Labor costs, meanwhile, declined at an annualized rate of 0.5%.
In one bright spot, the Institute for Supply Management's nonmanufacturing index came in at 50.6, up from 49.5 and ahead of analyst expectations. Weekly oil inventories from the Energy Information Administration are due out later.
Following the close of their respective rate meetings, the Bank of England and the European Central Bank both announced they would leave their key interest rates unchanged.
Recent declines in commodity prices should clearly be helping the market, said Paul Mendelsohn, chief investment strategist at Windham Financial. Other factors continue to hinder stocks' performance, he said. Investors are hesitant to buy ahead of tomorrow's employment report and may be taking additional time off during the holiday-shortened week, he said.
Regarding jobless claims, Mendelsohn said that investors will remain cautious as the unemployment number remains between 400,000 and 450,000. "If we get past 450,000 that would indicate the slowdown is really taking hold," he said.
Recent data, said Mendelsohn, leave investors uncertain about the economy's direction. "It's really been mixed, we've had good, we've had bad, it's really not conclusive." He said that exports have continued to bolster the economy, but a slowdown abroad may weaken exports in the future. Meanwhile, a slowdown in consumer spending continues to hinder the economy.
"The positive is ... those fundamentals are helping to create that drop in commodity prices," Mendelsohn said. "Eventually energy prices should come down to a level where the consumer feels comfortable and the economy can restart itself." He said that crude-oil prices need to dip into the $90-a-barrel range before the consumer feels an impact.
National Semi, Boeing, Lehman Brothers
Among the companies whose shares are expected to see active trade in Friday's session are National Semiconductor, Boeing and Lehman Brothers.
National Semiconductor is expected to report first-quarter earnings of 33 cents a share, according to analysts surveyed by FactSet Research.
Boeing shares may be in for a rough ride as the company negotiates with labor leaders to avert an expensive strike.
Shares of Lehman Brothers may see some relief following sharp losses on Thursday, but the key to its recovery will hinge on how well its efforts to secure fresh capital is progressing.