Stocks under pressure as commodities tumble

Click the chart for more market data. By Ben Rooney, staff reporterMay 5, 2011: 12:32 PM ET

NEW YORK (CNNMoney) — Stocks faltered Thursday as the dollar strengthened and put pressure on commodity prices.

In addition, investors were shying away from risky assets as the outlook for the U.S. job market darkened ahead of a key payrolls report on Friday.

The Dow Jones industrial average (INDU) fell 22 points, or 0.2%, at midday. The S&P 500 (SPX) was unchanged. But the Nasdaq (COMP) bucked the trend rising 17 points, or 0.6%, helped by strength in shares of broadband company JDS Uniphase.

The dollar gained 1.4% versus the euro after the president of the European Central Bank suggested inflation is a growing concern, but did not say anything specific about interest rates.

The stronger dollar helped fuel a selloff in the commodities market. Oil prices sank nearly 6% to about $103 a barrel. Silver prices plunged 7% and gold prices were off 2%.

Investors had been plowing money into the commodities this year, taking advantage of low interest rates in the United States in what is known as the carry trade.

“That whole trade is looking pretty bad now,” said Dan Greenhaus, market strategist at Miller Taback & Co. “Things are getting worse as the comododity selloff accelerates.”

On the Dow, energy producers Exxon Mobil and Chevron led the decline. Cisco was the best performer on the blue-chip index, adding 0.7% after the networking equipment maker announced a reorganization of its business lines as part of a plan to streamline operations.

Thursday’s losses also came after a spate of dour reports on the U.S. job market, including a larger-than-expected jump in first-time unemployment claims. Labor Department officials said the increase was due to seasonal anomalies, but jobless claims have been on the rise recently.

In addition, reports out Wednesday on private sector payrolls and planned layoffs painted a mixed picture.

The soft jobs data raised worries about Friday’s all-important monthly payrolls report form the Labor Department.

Economists surveyed by CNNMoney expect the unemployment rate to hold steady at 8.8%, with employers forecasted to add 185,000 jobs in April. For the full year, economists expect 2.3 million new jobs — just under 200,000 per month — and an unemployment rate of 8.4% by year end.

Stocks have been trending higher since the start of the year, but investors fear the economy is still on shaky ground.

Meanwhile, concerns over the looming debt ceiling deadline facing Congress and Europe’s debt problems have also weighed on the market.

Stocks ended in the red Wednesday, as disappointing reports on jobs and the service sector weighed on investors.

Companies: Automaker General Motors (GM) reported a first-quarter net profit of $3.2 billion, its fifth consecutive profitable quarter. Shares fell about 1%.

JDS Uniphase (JDSU) reported mixed quarterly results but issued a sales outlook for the current quarter that topped analysts’ forecasts. Shares of the networking equipment maker were up 10%.

Shares of Whole Foods (WFMI, Fortune 500) rose 2% a day after the company reported solid results after Wednesday’s closing bell and raised its outlook.

Dow component Kraft Foods (KFT, Fortune 500) reports quarterly results after Thursday’s close, with analysts expecting earnings of 47 cents a share.

Other companies reporting Thursday include Priceline.com (PCLN), Visa (V, Fortune 500) and insurer AIG (AIG, Fortune 500).

Also, retailers — including Target (TGT, Fortune 500) and Macy’s (M, Fortune 500) — reported a surge in April sales, boosted by Easter purchases. Shares of Macy’s rose more than 1% and Target’s stock also edged up.

Currencies and commodities: The dollar rose against its main trading partners, including the euro, pound and yen.

Commodities continued their decline, with oil for June delivery down $6.31, or 6%, to $102.93 a barrel.

Gold futures for June delivery fell $24.40, or 1.9%, to $1,490.90 an ounce.

Silver futures for July delivery extended their retreat, sliding $2.64, or 6.7%, to $36.75 an ounce. Just a week ago, silver prices were within spitting distance of breaching $50 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury eased, pushing the yield up to 3.26% from 3.22% late Wednesday.

World markets: European markets closed lower. Britain’s FTSE 100 slipped 1% and France’s CAC 40 sank 0.9%, while the DAX in Germany ended flat.

The European Central Bank and the Bank of England both left their key interest rates unchanged, as was widely expected.

Asian markets ended mixed. The Shanghai Composite ticked up 0.2% and the Hang Seng in Hong Kong dipped 0.2%. Japan’s market concluded three days of holidays.  

First Published: May 5, 2011: 9:43 AM ET