Stocks Down Slightly Ahead of Data

By Riva Gold 

Stocks inched lower Thursday as oil cracked $50 a barrel and the dollar strengthened.

The moves came as investors got one early window into the U.S. labor market. Data on jobless claims indicated employers are holding on to workers and the labor market is growing ahead of Friday's jobs report. A strong employment report could reassure investors that the economy remains on track, while bolstering the case for the Federal Reserve to raise interest rates in December.

The number of Americans applying for first-time unemployment benefits, a proxy for layoffs, decreased by 5,000 to a seasonally-adjusted 249,000 in the week ended Oct. 1, according to the Labor Department. That's the smallest figure since mid-April, when claims hit a near 43-year low.

The Dow Jones Industrial Average fell 27 points, or 0.2%, to 18254 shortly after the opening bell. The S&P 500 declined 0.1%, and the Nasdaq Composite declined 0.2%.

Elsewhere, the Stoxx Europe 600 index fell 0.2%. Banks were the biggest gainers in Europe, while the real estate sector -- which tends to perform best in a period of ultralow-interest rates -- was the worst performer.

Gold fell to a three-month low as the WSJ Dollar Index rose 0.5%.

Investors remain divided on the prospect of higher rates this year.

"The Fed is walking a tightrope," said Neil Mellor, currency strategist at BNY Mellon. Following recent speeches by U.S. Federal Reserve officials and stronger-than-expected economic data, some investors are thinking that "perhaps the moment of reckoning is nigh where monetary largess is withdrawn and risk assets will get hit," he said.

Federal Reserve Bank of Richmond President Jeffrey Lacker said on Wednesday that current economic conditions provide a "strong case" to raise short-term interest rates "more rapidly."

Futures markets suggest investors aren't fully convinced that will happen in December, currently pricing a 36% chance of no change, according to Fed-fund futures tracked by CME Group.

Meanwhile, minutes from the European Central Bank's last meeting were also in focus following recent concerns among investors about the end of its program of quantitative easing.

European Central Bank policy makers warned at their September meeting of "increasing challenges" in sourcing bonds its quantitative easing program, and hinted that the program could be expanded again.

Bonds sold off earlier in the week following a media report that the ECB might begin tapering, which the central bank subsequently denied. The yield on the 10-year German government bond rose to minus 0.001% on Thursday, according to Tradeweb, while yields on 10-year U.S. Treasurys was 1.733% from 1.718%, following four consecutive days of gains. Yields rise as prices fall.

Wall Street shares ended higher Wednesday, bolstered by a climb in oil prices and upbeat data on the U.S. services sector. Oil prices reached their highest settlement value since June on Wednesday after data showed that U.S. stockpiles fell for a fifth consecutive week. U.S. crude oil was last up 1% at $50.33 a barrel.

In currencies, the British pound fell 1% against the dollar to $1.2636. From here, "It's just a question of how far it can fall," Mr. Mellor said, given rising concerns about the U.K.'s future access to the single market.

The euro was down 0.3% against the dollar at $1.1180, while the dollar rose 0.4% against the yen.

Aaron Kuriloff, Harriet Torry and Tom Fairless contributed to this article

Write to Riva Gold at [e-mail]

(END) Dow Jones Newswires

October 06, 2016 09:54 ET (13:54 GMT)

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