Stocks pare losses but remain in red

Fewer people sought unemployment benefits last week. The US economy grew slightly more than previously estimated in the second quarter. AIG agrees to a plan to repay taxpayers.

By TheStreet Staff Sep 30, 2010 8:00AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 12:54 p.m. ET

 

Stocks were paring losses but remained in negative territory Thursday with weakness concentrated across the basic materials and tech sectors.

 

Despite earlier gains spurred by positive reports on jobs and economic growth, investors appeared to be weighing U.S. growth against continued uncertainty in global markets, and some traders were cashing in to record profits at the end of the third quarter.

 

At 12:54 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 32 points, or 0.3%, at 10,804. The S&P 500 ($INX) was down by 1.8 points, or 0.15%, at 1,143. The Nasdaq ($COMPX) was falling by 8 points, or 0.3%, to 2,369.

 

Stocks were gaining earlier today until declines among technology rattled investors. Advanced Micro Devices (AMD), NetApp (NTAP) and SanDisk (SNDK) were among the S&P's worst performers, losing more than 2%.

 

Caterpillar (CAT) was the Dow's biggest laggard, down 1.6%, followed by Hewlett-Packard (HPQ) and IBM (IBM). Boeing (BA), Travelers (TRV) and Bank of America (BAC) were the benchmark's top performers.

 

The U.S. economy expanded by 1.7% in the second quarter, according to the Commerce Department's third and final estimate. Economists had expected the previous estimate of 1.6%, which was cut from 2.4%, to remain unchanged, according to Briefing.com. Still, growth slowed from a rate of 3.7% in the first quarter.

"We're in a period of hibernation, and that's what GDP is showing us. But we're still not hiring, and that's going to drag on GDP in the future," said Rob Russell, the president of Russell & Co.

 

The Labor Department said the number of initial jobless claims fell by 16,000 to 453,000 during the week ended Sept. 25. Economists surveyed by Reuters had estimated that 460,000 claims were filed.

  

Midwest manufacturing activity rose unexpectedly this month to 60.4 from 56.7 in August, according to Chicago's Institute for Supply Management. Economists had anticipated a reading of 55, according to Briefing.com.

 

The strong economic reports lifted European stocks, which had been falling after Moody's (MCO) downgraded Spain's credit rating by one notch to Aaa, with a stable outlook, and after Ireland's central bank said a bailout of Anglo Irish Bank could cost $48.3 billion. The FTSE in London was adding 0.8%, and the DAX in Frankfurt was also ahead by 0.8%.

 

Hong Kong's Hang Seng declined 0.8%, while Japan's Nikkei lost 2%.

 

Adding to uncertainty regarding U.S. trade relations with China, the U.S. House of Representatives passed a bill that would penalize China for undervaluing its currency late Wednesday although it remained unclear whether the legislation would get enough votes in the Senate to become law.

 

Federal Reserve Chairman Ben Bernanke was scheduled to speak before the Senate Banking Committee this morning about implementing financial reforms.

 

In company news, American International Group (AIG) shares were rising 3.9% to $39.92 after the insurer agreed to a plan to repay its debt to taxpayers. Under the plan, the Treasury Department would exchange its $49.1 billion in preferred shares for 1.655 billion common shares.

 

AIG also reached an agreement to sell its Japan-based life insurance businesses, AIG Star Life Insurance and AIG Edison Life Insurance, to Prudential Financial (PRU) for $4.8 billion. Prudential's stock was falling 4.2% to $54.15.

 

Shares of Rite Aid (RAD) were shedding 0.6% to 94 cents after the drugstore chain said same-store sales fell 0.9% in September on weak prescription and discretionary purchases.

 

Wal-Mart (WMT) said chief financial officer Thomas Schoewe resigned and will be replaced by executive vice president Charles Holley. Wal-Mart shares were gaining 0.2% to $53.47.

 

The Energy Information Administration said natural gas storage levels increased by 74 billion cubic feet in the week ended Sept. 24. The level was much higher than the range of 67 billion to 71 billion cubic feet that analysts polled by Platts had projected.

 

Natural gas for November delivery was losing 14 cents to trade at $3.82 per million British thermal units. The November crude oil contract was adding $1.30 at $77.16 a barrel.

 

The December gold contract, the most actively traded gold future, was losing $6.20 at $1,304.10 an ounce. 

 

The dollar was trading higher against a basket of currencies, with the dollar index up by 0.2%. The benchmark 10-year Treasury note weakened 17/32, lifting the yield to 2.560%  

 

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