Stocks mostly declined Thursday after a weaker-than-expected reading on the nation’s economy and troubling news on jobs touched off renewed concerns about businesses and consumers.
But a $4.5 billion cash offer from Bristol-Myers Squibb Co. for its cancer drug partner ImClone Systems Inc. buoyed the technology-heavy Nasdaq composite index.
The Commerce Department’s report that gross domestic product grew at a 1.9 percent pace in second quarter disappointed investors. Economists polled by Thomson Financial/IFR had expected growth of 2.4 percent in the broad measure of the economy’s health.
Investors are also concerned by a Labor Department report that the number of people seeking jobless benefits jumped to the highest level in five years. Economists warned the weekly figures can be volatile and some dismissed them as an aberration, however.
But stocks pulled off their lows as oil declined and after an index of Midwestern business activity indicated growth.
The Chicago Purchasing Managers’ index, which measures business conditions across Illinois, Michigan and Indiana, signaled modest growth for the first time in five months. The reading of 50.8 topped the 49.6 seen in June and the 49 that economists had expected.
Larry Smith, chief investment officer at Third Wave Global Investors in Greenwich, Conn., said the tightness in the credit markets and high oil prices will continue to weigh on the nation’s economy and that the government’s $168 billion stimulus package won’t deliver a permanent fix.
“Tax rebates have been a very effective way of propping up the economy in the second quarter and less so in the third quarter,” he said. “It hasn’t fixed any problems. To fix the economic growth problems you have to restore liquidity to the system.”
In midday trading, the Dow Jones industrial average fell 147.78, or 1.28 percent, to 11,435.91. The Dow rose more than 180 points Wednesday. Stocks fell sharply Monday and erased those losses with a rally Tuesday.
Broader stock indicators traded mixed Thursday. The Standard & Poor’s 500 index fell 4.84, or 0.38 percent, to 1,279.42, while the Nasdaq rose 13.75, or 0.59 percent, to 2,343.47.
Bond prices jumped following the economic readings. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.97 percent from 4.05 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell $2.13 to $124.64 on the New York Mercantile Exchange after rising more than $4.50 on Wednesday. Oil has fallen about $20 since hitting a high above $147 on July 11, raising hopes that inflation pressures could ease.
Thursday’s stock market pullback follows bets investors made this week that the beaten-down financial sector would rebound and that the Labor Department’s employment report on Friday would show a less gloomy jobs market.
But other stock rallies have fizzled in recent weeks. Investors have remained concerned about the housing and credit markets, the health of financial companies and the effect of high commodities prices.
The latest GDP reading, which reflected consumers cashing tax rebate checks, still shows the economy grew at a faster pace than the weak 0.9 percent seen in the first quarter. But revised numbers also revealed for the first time that the economy shrank in the fourth quarter last year.
In corporate news, Wall Street applauded Bristol-Myers’ offer $60 per share for ImClone, a 30 percent premium to ImClone’s closing price of $46.44 Wednesday. Bristol-Myers, which already owns about 17 percent of ImClone, is a U.S. partner for the colon and head and neck cancer drug Erbitux. ImClone surged $17.53, or 38 percent, to $63.97. Bristol-Myers slipped 37 cents to $21.14.
Investors also sifted through a flurry of quarterly profit reports.
Exxon Mobil Corp. reported second-quarter earnings of $11.68 billion, the largest quarterly profit ever by a U.S. corporation. But the per-share earnings fell well short of Wall Street’s forecast, which assumed that record crude prices would push earnings even higher. The stock fell $2.53, or 3 percent, to $81.85 and weighed on the Dow industrials.
Motorola Inc. jumped 98 cents, or 13 percent, to $8.66 after posting a surprise profit for its second quarter. The company said it shipped more cell phones than in the first quarter.
Eastman Kodak Co. reported a second-quarter profit but the results missed Wall Street’s forecast. The stock declined $1.53, or 9.7 percent, to $14.24.
Diversified manufacturer Tyco International Ltd. rose $2.54, or 6 percent, to $45.05 after the company said it swung to a fiscal third-quarter profit from a loss a year earlier when the company booked charges.
Declining issues outpaced advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 458.4 million shares.
The Russell 2000 index of smaller companies fell 3.46, or 0.48 percent, to 715.40.
Overseas, Japan’s Nikkei stock average closed up 0.07 percent. Britain’s FTSE 100 fell 0.15 percent, Germany’s DAX index rose 0.62 percent, and France’s CAC-40 advanced 0.02 percent.