By Geoffrey Smith
Investing.com -- U.S. stock markets opened with fresh selling on Thursday, after a rise in initial jobless claims reinforced worries about the economic outlook.
By 9:40 AM (1340 GMT), the Dow Jones Industrial Average was down 195 points, or 0.7%, at 26,569 points, its lowest since early August. The S&P 500 was down 0.9% and the Nasdaq Composite was down 1.0% on the day and now down nearly 13% from its last all-time high at the start of this month.
The declines came after the Bureau Labor Statistics said initial jobless claims edged up to 870,000 from an upwardly-revised 866,000 last week, disappointing hopes for another modest decline.
"The momentum in the labor market is stalling," said Ian Shepherdson, chief economist with Pantheon Macroeconomics, in emailed comments.. "Consumers’ spending - nearly 70% of the economy - can’t continue to increase at its recent pace in the aftermath of the ending of enhanced unemployment benefits, and the latest upturn in Covid cases and hospitalizations - up yesterday for the third straight day - threatens to trigger renewed restrictions on economic activity."
Shepherdson said "the need for further fiscal action is obvious, but we no longer expect any meaningful relief bill until February."
Federal Reserve Chairman Jerome Powell has stressed the need for fiscal action in Congressional testimony this week but lawmakers remain as far apart as ever on an agreement. Powell's colleague, Boston Federal Reserve President Fred Rosengren had said late on Wednesday that the economy "remains fragile,” and that "a second wave of COVID-19 infections this fall and winter is likely, which could cause some states to impose new restrictions on mobility and face-to-face interactions.”
Rosengren repeated those sentiments in an interview with Yahoo Finance on Thursday.
Once again, data from the housing market came in considerably stronger than those from the labor market. New home sales surged in August to 1.011 million, well above expectations and the highest number since 2006.
Among individual stocks, CarMax (NYSE:KMX) fell 9.1% and Accenture plc (NYSE:ACN) fell 5.3% after both disappointed with their quarterly updates. By contrast, Darden Restaurants (NYSE:DRI), the group behind the Olive Garden and Longhorn Steakhouse chains, rose 4.4%, responding to the reinstatement of its quarterly dividend after its year-on-year decline in sales eased to only 28% from 43% three months earlier.
Elsewhere, JPMorgan (NYSE:JPM) stock fell 0.3% to its lowest since early July on reports that it is to pay a settlement of around $1 billion to avoid prosecution for market manipulation, while E. W. Scripps stock (NASDAQ:SSP) rose 18% and Berkshire Hathaway stock (NYSE:BRKa) fell 0.8% after Warren Buffett's investment firm agreed to back Scripps' $2.65 billion acquisition of ION Media, the maker of TV shows such CSI and Law & Order.