Stocks on Wall Street plunged on Thursday, but few investors seemed to settle on one reason.
A broad sell-off sent the Dow Jones industrial average down 344.65 points at the close — the index’s worst performance since June — hours after the government reported that the number of Americans filing for unemployment benefits unexpectedly rose last week.
But the sharpest declines came nearly two hours after that report was released, a lag that rarely occurs in today’s overheated financial world. The other financial news of the day, including a $1.70 drop in the price of oil, would usually cheer investors. So what gives?
“I’m trying to answer the same question,” Steve Sachs, who directs trading at Rydex Investments, said. With no clear catalyst, Mr. Sachs pointed out that trading was relatively light on Thursday, which means big trades by a handful of investors can cause major swings.
“Volumes overall are very, very light,” he said. “If this was happening last week, before Labor Day, everyone would be saying, ‘Don’t read too much into it.’ Nobody’s around. There aren’t a lot of players.”
Speculation focused on fears about the direction of the economy, though it remained unclear why anxieties that have been around for months would suddenly take hold. Some investors said they were worried about the unemployment report for August, which will be released Friday. Economists expect the economy to have shed another 70,000 jobs last month; a worse-than-expected showing would be an ominous sign for the economy’s health in the rest of the year.
At the close, the Standard & Poor’s 500-stock index was off 2.9 percent, or 38.15 points, to 1,236.83. The Dow was also down 2.9 percent, to 11,188.23, and the Nasdaq had declined 3.2 percent, or 74.69 points to 2,259.04.
The worst performers were in the energy sector, where the decline in oil prices has soured investors’ mood on refineries and commodity companies. Exxon Mobil shares traded down 1.5 percent, and shares of Chevron were off nearly 3 percent.
Usually, lower oil prices mean a good day for stocks. While shares of energy companies may decline, investors tend to buy into businesses more dependent on consumer spending, which has been curtailed by high gasoline prices.
But on Thursday, reports from the nation’s biggest retailers revealed a consumer that has been opting to shop at discount stores. Big-box retailers like Target saw their sales decline in August, while sales rose at Wal-Mart, Costco and other wholesale stores. The reports suggested that profits at many American retailers would continue to fall even as gas prices come down.
“When oil was $145, everyone screamed inflation. At $105, everyone is screaming, ‘Where is the demand?’,” said Ryan Larson, a trader at Voyageur Asset Management. “It’s like the markets can’t really be happy one way or the other.”
Other analysts suggested that computerized trading models may be the culprit for Thursday’s sell-off. Richard Sparks, an analyst at Schaeffer’s Investment Research, noted that the S.&P. 500 index fell below 1,260 just minutes before the day’s biggest decline. He suggested that some investors may be using computers that are programmed to sell stocks after that level was reached.
Or the sell-off may be a result of simple momentum.
“The acceleration is feeding on itself,” Mr. Sparks said.
While Thursday’s declines are the worst since June, the market could move in an entirely different direction depending on the data released on Friday by the Labor Department, which will report the unemployment rate for August and estimate how many Americans were laid off during the month.
A report on Thursday suggested that the figure could be dire. The number of Americans who registered for unemployment benefits last week rose to 444,000, near a five-year high, according to data compiled by the Labor Department.
“This morning’s employment numbers continue to indicate that the labor sector remains soft at best and looks to continue to shed jobs throughout the remainder of the year,” Joseph Brusuelas, chief economist at Merk Investments, wrote in a note.
Other economic data released on Thursday was more positive. Productivity was revised up to 4.3 percent last quarter, far higher than economists had estimated.
A separate private report showed that activity in the services sector grew in August after contracting for months. The non-manufacturing index of the Institute for Supply Management rose to 50.6 from 49.5 in July, on a scale where readings above 50 indicate growth.
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