Stocks fell Thursday after a surprise increase in new claims for jobless benefits and a weaker regional manufacturing report raised concerns about the economy.
The Dow Jones industrial average fell about 30 points in late trading after rising four the last five days. All the major indexes were down.
Demand for safety holdings increased. Treasury prices rose, pushing down interest rates, after traders became more cautious. Gold closed at a record high.
Economic reports were mostly discouraging. The government said that the number of people seeking unemployment benefits rose unexpectedly last week. Initial claims for jobless benefits increased 12,000 to 472,000. That's the highest level in a month and follows three straight weeks of declines. Economists had forecast another drop.
A drop in the Philadelphia Federal Reserve's index of regional manufacturing also hit stocks. The Philly Fed said manufacturing continued to expand in June but at a slower pace than in May. Its index of manufacturing activity dropped to 8 from 21.4 the month before. Traders are concerned that the slowdown signals that a recovery is fading in one of the strongest parts of the economy.
The reports provided more reminders that the economy isn't bouncing back quickly. "It adds up to a modest, uneven recovery," said Paul Ballew, chief economist at Nationwide Insurance in Columbus, Ohio, and a former senior economist with the Federal Reserve. "We're not expecting some light switch being turned on here."
Retailers and other stocks that depend on steady consumer spending fell following the jobs report. Bed Bath & Beyond Inc. fell 6.7 percent, while DirecTV Inc. fell 3.9 percent.
Stocks regarded as safer investments during weak economies such as utilities and health care rose. FirstEnergy Corp. gained 1.7 percent, while health insurer Aetna Inc. climbed 4.3 percent after it forecast that its second-quarter earnings would beat analysts' expectations because of lower medical costs.
Traders have been trying to determine where stocks are headed since major stock indexes hit their 2010 peak in late April. The Dow has risen 6 percent from its lowest close of the year on June 7 but it's still down 7 percent from its high of 11,205 on April 26.
A stronger euro kept the market's losses in check. The euro rose after a bond offering by Spain's government drew solid demand. Traders have been concerned that European countries like Spain with high debt loads would have trouble raising money because of worries about defaults. A stronger euro is seen as a sign of confidence in Europe's ability to cut its debt without jeopardizing an economic rebound. The euro climbed to $1.2396.
In the last hour-hour of trading, the Dow fell 22.75, or 0.2 percent, to 10,386.63 after being down 90 in morning trading. The Standard & Poor's 500 index fell 3.43, or 0.3 percent, to 1,111.18, and the Nasdaq composite index fell 5.91, or 0.3 percent, to 2,300.02.
Bond prices rose, pushing down interest rates. The yield on the benchmark 10-year Treasury note fell to 3.20 percent from 3.27 percent late Wednesday.
Crude oil fell 84 cents to $76.83 per barrel on the New York Mercantile Exchange. Gold closed at a record $1,248.70 an ounce.
The jobs report is often the most closely watched number of the week because a recovery in the labor market is crucial to a sustained rebound in the economy. The government's most recent monthly jobs snapshot found that employers added only 41,000 private-sector jobs in May. That was far weaker than expected and raised concerns that a pickup in hiring was slowing.
Brett Hryb, portfolio manager with MFC Global Investment Management in Toronto, said the economic numbers were the latest in a string of disappointments since last week. On Friday, the government reported that retail sales fell in May for the first time in eight months. This week, reports on homebuilder sentiment and housing starts have missed expectations.
"The market always anticipates what the economy is going to do," he said. "It was giving a signal that we were going to see a fairly strong, normal recovery and I think the reality that we're seeing is that the recovery is going to be more longer-tailed."
Shares of BP fell 22 cents to $31.63 after CEO Tony Hayward told a House panel that he was "deeply sorry" for the Gulf of Mexico rig explosion and oil spill.
Hayward's appearance on Capitol Hill came a day after BP agreed to put $20 billion into a fund for victims of the spill and to suspend dividend payments for the rest of the year. BP had been scheduled to pay $2.6 billion in first-quarter dividends next week. The company's shares have lost about half their value since the rig it operated exploded in April.
Bed Bath & Beyond fell $3.71, or 8.2 percent, to $41.41, while DirecTV dropped $1.57, or 4 percent, to $37.76. FirstEnergy rose 44 cents, or 1.2 percent, to $38.37. Aetna rose $1.22, or 4.2 percent, to $30.55.
Losing stocks were ahead of gainers by about 3 to 2 on the New York Stock Exchange, where volume came to 845 million shares.
The Russell 2000 index of smaller companies fell 1.53, or 0.23 percent, to 664.60.
Britain's FTSE 100 rose 0.3 percent, Germany's DAX index rose 0.5 percent, and France's CAC-40 gained 0.2 percent. Japan's Nikkei stock average fell 0.7 percent.
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