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U.S. stocks drop on Fed disappointment, data; Dow Jones down 0.84%

Stock MarketsJul 12, 2012 09:44AM ET
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This article has already been saved in your Saved Items - U.S. stocks opened sharply lower on Thursday, as disappointing U.S. employment data fueled fresh concerns over the strength of the country’s economic recovery, while the Federal Reserve dampened expectations for further stimulus measures in the near future.

During early U.S. trade, the Dow Jones Industrial Average dropped 0.84%, the S&P 500 index tumbled 1% while the Nasdaq Composite index plunged 1.37%.

Official data showed that the number of people who filed for unemployment assistance in the U.S. last week fell significantly more-than-expected, matching the lowest level in four years.

The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending July 7 fell to a seasonally adjusted 350,000, compared to expectations for a decline to 372,000.

The data came after the Fed said in the minutes of its June policy meeting that the U.S. economy would have to worsen further before the central bank implements additional easing measures.

Market sentiment also remained under pressure after the European Central Bank’s monthly bulletin reiterated that downside risks have materialized and that growth in the region will remain weak.

Financial stocks were broadly lower, as U.S. lenders tracked their European counterparts. Bank of America saw shares tumble 1.57% and Citigroup dropped 1.16%, while JP Morgan and Goldman Sachs declined 1.01% and 0.80% respectively.

Energy stocks also contributed to losses, as oil prices tumbled over 1%. Exxon Mobil dropped 0.53% and EOG Resources plunged 2.41%. 

Earlier in the day, Centrica, which owns British Gas, said it agreed to buy two New York-based power providers from a U.S. subsidiary of Iberdrola for USD110.2 million in cash to strengthen its position and increase its customer base in the U.S. Northeast. 

Elsewhere in corporate news, U.S. insurer Cigna retreated 1.02% after saying it agreed to buy a 51% stake in Finansbank's wholly owned insurance unit Finans Emeklilik for USD104 million.

In the tech sector, Apple shares dropped 0.45%, amid reports sellers of the company’s next-generation iPhone on China's largest e-commerce platform, Taobao, were accepting pre-orders of the device, which hasn’t been released yet.

On the upside, pharmaceutical giant Merck & Co. surged 4.34% after announcing that the trial of an advanced clinical study of an osteoporosis treatment met primary efficacy goals, leading the study’s data-monitoring committee to recommend ending the trial earlier than scheduled.

Across the Atlantic, European stock markets were sharply lower. The EURO STOXX 50 declined 0.78%, France’s CAC 40 dropped 0.63%, Germany's DAX retreated 0.72%, while Britain's FTSE 100 tumbled 1.05%.

During the Asian trading session, Hong Kong's Hang Seng Index tumbled 1.65%, while Japan’s Nikkei 225 Index dropped 1.5%.

Also Thursday, official data showed that U.S. import prices fell significantly more-than-expected in June, dropping by 2.7% in June, compared to expectations for a 1.7% decline.

Import prices for May were revised to a 1.2% drop from a previously reported decline of 1.0%.

U.S. stocks drop on Fed disappointment, data; Dow Jones down 0.84%

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