Wall Street falls on economic jitters

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For the first time this week the S&P 500 closed below the 1,000-point threshold on Thursday, as healthcare, retail, energy and telecoms stocks weighed on sentiment ahead of today’s US monthly jobs report.

The S&P 500 fell 0.6 per cent to 997.08, while the Dow Jones Industrial Average slipped 0.3 per cent to 9,256.26. The Nasdaq Composite closed 1 per cent lower at 1,973.16.

Shares in Cisco recovered from early losses and rose 0.6 per cent to $22.31. John Chambers, chief executive of the IT networking company, forecast another drop in quarterly revenue, even though it announced better results than expected.

Early trading was choppy as investors reacted to news on unemployment and retail sales.

Figures showed that fewer people than expected claimed jobless benefits for the first time last week, but the effect on stocks was hampered by a rise in the number of people continuing to claim benefits.

“The jobs data show we are going in the right direction, and that we have hit the bottom, but we think earnings are going to be the driver of the next bull market as things return to normal,” said Frank Ingarra, portfolio manager at Hennessy Funds.

Poor same store sales in July among 30 major retailers and mixed earnings, along with a JPMorgan downgrade of healthcare stocks, were factors in pulling the major benchmarks lower. Thomson Reuters reported a drop of 5.1 per cent in same store sales last month.

However, amid the gloom, several retailers raised their full-year profit guidance.

Gap, the clothing retailer, jumped after beating its forecasts for July sales and increased its outlook on quarterly profits. The shares rose 8.2 per cent to $18.14.

Macy’s was also able to increase its outlook for second-quarter earnings, bringing them far above analysts’ expectations in spite of seeing weaker sales than had been predicted. Its shares climbed 5.6 per cent to $15.01.

Target slipped 0.2 per cent to $41.71 after reporting lower sales than analyst estimates. The company said the dip in comparable sales from last year was in line with its own forecasts.

BJs Wholesale Club, which has shown strength during the recession as customers snap up goods at wholesale prices, saw sales drop more than expected, hurt in part by lower petrol prices. The shares gave up 3.2 per cent to $31.24.

Within the healthcare sector, which was lowered to underweight by JP Morgan, shares in Gilead Sciences fell 3 per cent to $45.45, while Amgen lost 2.6 per cent to $60.69.

In the energy sector, ExxonMobil fell 0.4 per cent to $69.73 while Chevron lost 0.8 per cent to $69.25.

Telecoms were hurt as shares in MetroPCS, the low-cost mobile telephone operator, slumped 29.2 per cent to $8.99. The company revealed a steep drop in new customers and a rise in the number of subscribers leaving its service and its earnings fell well short of Wall Street’s estimates.

Financial shares were generally lower, although Citigroup continued its recent run and closed up 6.2 per cent at $3.80.

In the insurance sector, Prudential and Allstate both fell after reporting quarterly results.

Prudential easily beat analysts’ profit forecasts but failed to raise the upper end of its full-year outlook and the shares slipped 2.7 per cent to $45.63.

Allstate’s shares dropped 3.4 per cent to $27.27 after it missed Wall Street’s expectations, suffering from unexpectedly high pay-outs following recent storms in the southern states.

Elsewhere Comcast, the cable company, was able to cut costs sufficiently to bring quarterly profits above analyst estimates. After a warning that the company was seeing a continuing slowdown in the growth in new customers this quarter, the shares slipped 0.1 per cent to close at $15.05.

Rival satellite television provider DirecTV’s stronger-than-expected revenues failed to translate into a rise in profits after one-off charges. The shares fell 3.6 per cent to $24.84.

The first day of trading for CDC Software saw its shares close at $9.99, after being offered at a price of $12.

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