Stocks tanks as traders choose to see things in a pessimistic light. The Dow ($INDU) fell 344.65 points to close the session at 11,188.23. The S&P 500 ($SPX) declined 38.15 points to 1,236.83. The Nasdaq ($COMPQ) gave up 74.69 points to 2,259.04. Volume picked up on the session with 1.30 billion shares traded on the NYSE and 2.36 billion shares exchanged on the Naz. Market breadth was extremely negative by a 5-to-26 and 6-to-23 margin on the Big Board and Naz respectively.

Economic news was mostly mixed Thursday, but traders saw the glass half empty and not half full. Chain store sales data was also mixed, but traders were not pleased with the outlook for consumer spending. Although oil prices continue to decline, a weak jobs market is a concern for the Fed and traders alike. A profit warning from tech company Ciena (CIEN) also left traders in a selling mood.

CIEN is a maker of communications equipment and the company reported earnings that fell 10 percent in the third quarter. This did match expectations, but the company provided a forecast that was well below estimates for the fourth quarter. The company noted that delayed orders were to blame, but traders sold the stock anyway with CIEN down 24.90 percent to $13.09.

A late day rush to buy back to school goods helped retailers in August, but total sales were hurt by discounts. Wal-Mart (WMT) did exceed same store sales results during the month with sales up 3.0 percent. However, non discounters didn’t see the same strength and a soft outlook for employment and the economy is general is keeping expectations down. After seeing gains initially, even WMT shares closed flat with the S&P Retail Index ($RLX) down 3.10 percent to 401.44.

In economic news, the ADP Employment Report showed that payrolls fell by 33,000 excluding government jobs. However, expectations for government jobs are for a drop of 75,000, so tomorrow’s report could be disappointing. Jobless claims moved higher than expected this past week as well, up 15,000 to 444,000 putting the four-week moving average at 438,000. The fact that productivity gains were revised sharply higher for the 2^nd quarter is a good thing overall, but does raise concerns about the labor market in the short-term.

Ironically, oil prices fell Thursday as stock prices got pummeled with the commodity down $1.46 to $107.89. Weekly inventory data showed that oil reserves fell by 1.9 million barrels with gasoline reserves down by 1.0 million. The fact that crude is falling is a positive for the economy and profits, but part of the reason prices are declining is softer view of global economic growth.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site