NEW YORK—Stocks fell in New York on Thursday afternoon, as investors became wary after a strong aftershock earthquake hit northern Japan and a possible U.S. government shutdown casts a dark shadow over the U.S. economic recovery efforts.
The Dow Jones Industrial Average fell 17.3 points, or 0.1 percent on Thursday. The S&P 500 Index dropped 3.7 points, or 0.1 percent, and the Nasdaq Composite Index shaved 2 points, or 0.2 percent.
A powerful earthquake, rated magnitude 7.4 on the Richter scale, shook the ocean off northern Japan late Thursday evening local time. The Dow fell by more than 100 points immediately after the earthquake and tsunami warning was announced, but rallied slightly after the tsunami warning was lifted by Japanese authorities.
Stocks Pull Back
The Dow pulled back Thursday, after it rose to almost three-year highs on Wednesday. In addition to the quake, oil futures rose and exceeded $110 per barrel on Thursday.
All S&P 500 industries fell Thursday, with the biggest decliners seen in the utilities industry. In the Dow, the biggest losers were General Electric Co., which fell 1 percent, and Cisco Systems Inc., which fell 0.9 percent.
Oil has been boosted by increasing violence in Africa and political unrest the Middle East, as well as rising demand from emerging markets from the global economic recovery gaining steam. U.S. light crude oil futures settling in May settled 1.4 percent higher Thursday, to $110.30 per barrel in the United States. North Sea Brent crude also gained in London trading.
The euro fell against the dollar on Thursday as the European Central Bank (ECB) raised interest rates by 25 basis points to 1.25 percent, the first interest rate rise since 2008. Jean-Claude Trichet, president of the ECB, raised rates in an effort to combat inflation in the EU’s biggest economy, Germany. However, Trichet told reporters Thursday that the rate hike may be a one-off move and no further rises are expected imminently.
The Bank of England said on Thursday that it would keep its rates at 0.5 percent. Both moves were expected by Wall Street analysts.
Portugal this week became the third and latest European Union nation to request a financial bailout from the EU and the International Monetary Fund. Terms of the bailout have not yet been determined, but analysts expect the amount to be up to 90 billion euros (US$130 billion). Portugal needs cash as the nation will face massive bond redemptions in June 2011.
U.S. stocks got a small boost from American economic data, which showed that initial jobless claims last week fell unexpectedly by 10,000, from 392,000 in the previous week to 382,000 last week, according to the Department of Labor. Claims totaling 400,000 or below signals economic recovery, economists say.
"The continued downtrends in initial and continuing jobless claims are encouraging signs of labor market improvement … and we expect them to persist as the overall economic expansion continues apace," Barclays Capital analysts wrote in a research note Thursday.
Some retailers also reported March same-store sales data at stores open for one year or longer, with Walgreen and CostCo reporting the best results. CostCo said sales increased 13 percent year over year.
Shares of Bed Bath & Beyond increased by more than 10 percent after the company reported better-than-expected quarterly earnings. Pier 1 Imports also received a boost after it announced solid earnings.