Thursday, May 31, 2012

--Stocks fall as underwhelming domestic data outweighs strong readings in Germany

--U.S. data on labor market, Chicago-area manufacturing downbeat

--Dow industrials headed for biggest monthly slide of the year 


   By Matt Jarzemsky 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Dow industrials slid Thursday, threatening to make their worst monthly showing in two years, following downbeat readings on the labor market and Chicago-area business activity.

The Dow Jones Industrial Average fell 47 points, or 0.4%, to 12373 in midday trade. The blue-chip benchmark, already down 6% this month through Wednesday's close, looked to post the latest in a streak of May slides, having dropped 1.9% in May 2011 and 7.9% in May 2010.

Standard & Poor's 500-stock index slipped 9 points, or 0.7%, to 1305. Energy and materials stocks led declines in the index, while Caterpillar fell 3.9%, weighing on the Dow. The Nasdaq Composite fell 23 points, or 0.8%, to 2814.

"It's just an awful close to an awful month," said Mark Lehmann, president of JMP Securities. "You just got more of the same, unfortunately, which is softer data, soft markets, commodities weaker.

"You're probably in store for more of this, more malaise as opposed to recovery," Mr. Lehmann added. "We've--for the first time in a long time--been seeing 'recession' in the lexicon."

The U.S. economy added 133,000 private-sector jobs in May, according to a report by Automatic Data Processing and consultancy Macroeconomic Advisers, fewer than the 150,000 forecast by economists in a Dow Jones Newswires poll.

The number of U.S. workers filing new applications for unemployment benefits also rose more than expected last week, the Labor Department reported.

"You take the two together and the labor market is not what you want right now," said Jim McDonald, chief investment strategist at Northern Trust in Chicago.

The downbeat data come on the eve of the government's closely watched employment report, which has fallen short of expectations the last two months. Economists predict jobs outside of agriculture grew by 150,000 in May.

A reading on manufacturing activity in the Chicago region fell more than economists expected, to the lowest level since September 2009.

The Commerce Department, meanwhile, lowered its estimate for first-quarter U.S. economic growth to 1.9% from 2.2%, in line with economists' expectations that the U.S. economy slowed more than initially thought during the period. The price index for personal consumption increased 2.4%, as previously estimated.

Germany's jobless rate fell to 6.7% in May, the lowest level since comparable records began in 1998, and better than economists' prediction for a 6.8% rate. Meanwhile, German retail sales rose 0.6% in April, beating expectations of a 0.1% gain.

In addition, the inflation rate for the euro zone slowed to 2.4% in May from 2.6% in April, less than expectations of 2.5%. Slowing inflation gave hope that the European Central Bank would be more willing to provide additional stimulus measures.

European markets fell, erasing earlier gains after the downbeat U.S. data. The Stoxx Europe 600 slid 0.7% after slumping 1.5% on Wednesday.

Asian markets fell on the back of U.S. stock-market declines on Wednesday and disappointing Japanese industrial-production data. Japan's Nikkei Stock Average fell 1.1% and China's Shanghai Composite declined 0.5%.

In corporate news, shares of Facebook fell 3.3%, extending the decline from their $38 initial public offering price.

Joy Global skidded 6.6% as the mining-equipment maker lowered its full-year guidance on a slowing international market, both in Europe and in China.

Ciena rallied 7.8% after the network-gear maker reported a fiscal second-quarter adjusted profit, compared with analyst expectations of a slight loss, and revenue that topped forecasts.

F5 Networks, a supplier of gear for managing Internet traffic, slid 6% after its sales chief resigned.

TiVo sagged 5.6% after the maker of digital television recorders posted a bigger-than-expected quarterly loss and gave a downbeat outlook.

-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; matthew.jarzemsky@dowjones.com

(END) Dow Jones Newswires

May 31, 2012 11:57 ET (15:57 GMT)