U.S. Stocks Open Lower After Data Illustrating Weak Economy
NEW YORK (MarketWatch) -- U.S. stocks skidded lower at Thursday's start after the government revised its estimated growth in gross domestic product for the fourth quarter, with the U.S. economy in 2007 slowing to its slowing pace in five years.
"The realization of a weaker economy is starting to hit home," said Kevin Giddis, managing director, fixed-income trading at Morgan Keegan & Co. Inc.
The Dow Jones Industrial Average dropped 85.31 points to 12,608.97, with 26 of its 30 components posting losses early on.
The S&P 500 declined 7.86 points to 1,372.16, while the Nasdaq Composite slid 10.08 points to 2,343.70
Already lower amid some weak earnings, including a loss of more than $29 billion for Sprint Nextel, stock futures added to their losses in the wake of the GDP data in electronic trade ahead of Wall Street's opening bell. .
In a separate report, the government reported a rise in weekly jobless claims, with those filing for state unemployment benefits rising by 19,000 last week to hit their highest count since late January. .
"Although the four-week average fell by 1,250, the upward trend in this moving average since the end of last month suggests that labor markets remained weak throughout February," said Lehman Brothers economist Drew Matus.
Stocks had a mixed session on Wednesday as the Federal Reserve signaled more rate cuts and expressed caution about the economy and inflation.
On the New York Mercantile Exchange, crude-oil futures rose to trade back above $100 a barrel, as the dollar extended losses against other major currencies.
Crude oil for April delivery gained 83 cents to $100.47 a barrel in electronic trading. .
Sprint Nextel swung to a fourth-quarter loss of $29.5 billion after taking a non-cash goodwill impairment charge of $29.7 billion as well as other special items. Shares in the group, which also cancelled its dividend, fell 8.4% in pre-open trading.
Freddie Mac's fourth-quarter loss widened to $2.45 billion from a year-earlier loss of $401 million due to mark-to-market losses of about $3.1 billion and continued weakness in the U.S. housing market.
Sears Holdings Corp. said fourth-quarter profit nearly halved to $426 million from $811 million a year earlier. The company attributed the shortfall to a poor performance of its U.S. Sears stores and Kmart stores.
Deutsche Telecom reported another quarterly loss, but said its business is stabilizing and managed to top forecasts for its underlying profit.
Shares in Apple Inc. could gain after the company's chief operating office said the company is confident it'll meet 2008 targets for iPhone sales and added it isn't permanently married to the single carrier model it has used for the iPhone so far.
The Wall Street Journal reported that merger talks between Brazilian miner Companhia Vale do Rio Doce and Xstrata have broken down due to disagreement on the role Xstrata shareholder Glencore International AG would play in the combined entity.
Among a raft of companies due to report earnings Thursday, Dell is expected to post a fourth-quarter profit of 36 cents a share and American International Group is seen earning 69 cents a share in the latest quarter.
Asian markets ended mixed Thursday, with Japanese stocks falling as a stronger yen hurt exporters. European indexes extended losses after the release of U.S. GDP and jobless claims count, with the U.K. FTSE 100 falling 1.3% to 5,997.70.
By Kate Gibson