NEW YORK (MarketWatch) -- U.S. stocks declined on Thursday, folding after a four-session winning streak, with Wall Street wary ahead of the next day's monthly jobs report.
"People are hesitant to make big bets today right in front of the big payrolls report tomorrow," said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.
Stocks resumed their decline after briefly rallying as weekly jobless claims fell and a gauge of manufacturing came in better than feared, lessening concerns about the direction of the economy.
After climbing 103 points and falling as much as 88 points, the Dow Jones Industrial Average (DJI) lately was down 90.21 points to 11,523.32.
The Standard & Poor's 500 Index (SPX) fell 11.47 points to 1,207.42, with financials hardest hit and consumer staples faring best among its 10 industry sectors.
The Nasdaq Composite (RIXF) declined 28.69 points to 2,550.77.
All three indexes advanced on Wednesday, the final trading session for August, with the S&P 500 down 6% for the month, the worst since the 'flash-crash' induced decline in May 2010 and worst August in a decade.
"Market valuations, such as the P/E ratio, fell to the lowest levels only seen during bear market bottoms," according to Marc Pado, U.S. market strategist at Cantor Fitzgerald.
For every stock rising more than two fell on the New York Stock Exchange, where 658 million shares traded as of 3 p.m. Eastern.
"In a relatively shocking turn of events, the ISM index held above 50," Dan Greenhaus, chief global strategist at BTIG LLC, wrote in an emailed note after the Institute for Supply Management's factor index fell to 50.6 in August from 50.9 the prior month.
The Labor Department reported applications for initial unemployment benefits last week fell by 12,000 to 409,000.
Perspective
The stock market's recent show of resilience is largely due to current valuations, which took a large hit during the five-week correction that had the S&P 500 tumble 13%, with investors currently paying less for equities on an earnings-per-share basis than they did following every recession since Ronald Reagan was president, said Skrainka at Cornerstone Wealth Management.
The trailing price-earnings ratio currently resides at 3.5% less than the average PE during the 10 recessions since 1949, and at a level last reached in 1982, the worst recession in the period after World War II "when we also had double-digit inflation," Skrainka said.
The factors underlying the low valuations include worries that deficits are going to be an enormous burden on the U.S. economy, that European banks are a crisis waiting to happen, and that the U.S. economy is headed toward a double-dip recession.
"That's the story line. But amateurs listen to stories, while professionals do the math. When I say the economy is healing, people say 'you've got to be kidding,' but I pull the numbers out, and yes it's a slow, stubborn recovery," but nowhere near as dire as many believe, said Skrainka, who adds U.S. economic growth, housing starts, auto production and employment are all much improved over where they stood in March 2009.
Copyright © 2011 Dow Jones Newswires
