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Stocks open lower after weekly employment reading

(Agencies)
Updated: 2008-10-02 22:00

NEW YORK -- Stocks declined and credit markets remained tight early Thursday after the number of people seeking unemployment benefits rose last week to a seven-year high. The Dow Jones industrials fell by about 135 points, their fourth straight triple-digit move.

Investors also remained nervous ahead of a possible Friday House vote on the $700 billion financial sector rescue package.

The Labor Department's report that initial claims for unemployment benefits rose by 1,000 last week to a seasonally adjusted 497,000 unnerved investors worried about not only about strains in the financial market but the effect on the broader economy.

Analysts had been expecting unemployment claims would fall to 475,000; instead, the level of jobless claims is the highest seen since the immediate aftermath of the Sept. 11, 2001, terrorist attacks.

The well-being of the labor market is a key concern for investors as rising unemployment could further dent consumer spending, which accounts for more than two-thirds of US economic activity.

While the figures reflect about 45,000 claims from Texas and Louisiana following the landfall last month of Hurricanes Ike and Gustav, the increase nonetheless unnerved investors worried that the economy is suffering while Washington tries to underpin the financial system with a government bailout.

The House is expected to vote on a revised plan as soon as Friday after rejecting an earlier version on Monday. The Senate approved the latest version by a wide margin late Wednesday.

Following the unemployment report, the credit markets showed some increased strain and stocks declined. The yield on the 3-month T-bill, the safest type of investment, fell to 0.78 percent from 0.79 percent late Wednesday. The historically low yields indicate investors are willing to accept the smallest of returns to safeguard their money.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.71 percent from 3.74 percent late Wednesday.

In the first half-hour of trading, the Dow fell 134.45, or 1.24 percent, to 10,696.62.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 12.35, or 1.06 percent, to 1,148.71, and the Nasdaq composite index fell 19.60, or 0.95 percent, to 2,049.80.