U.S. Stocks Slump on Rise in Jobless Claims; Caterpillar Drops

By Lynn Thomasson

Sept. 4 (Bloomberg) -- U.S. stocks declined after the number of unemployed Americans reached a five-year high and Ciena Corp. said telephone and cable companies are slowing equipment purchases.

Caterpillar Inc., General Motors Corp. and Home Depot Inc. retreated about 2 percent as U.S. jobless claims increased more than economists forecast. Ciena, which counts AT&T Inc. among its customers, plunged 21 percent after giving a lower-than-estimated revenue projection. Legg Mason Inc. fell 7.3 percent after Credit Suisse Group AG advised selling the asset manager.

The Standard & Poor's 500 Index slipped 8.13 points, or 0.6 percent, to 1,266.85 at 9:37 a.m. in New York. The Dow Jones Industrial Average lost 100.79, or 0.9 percent, to 11,432.09. The Nasdaq Composite Index decreased 18.42, or 0.8 percent, to 2,315.31.

``If you look at the data we have on the U.S. and global economy, things are only getting worse and that leads me to believe that demand is going to slow down and slow down pretty quickly,'' Diane Garnick, a New York-based investment strategist at Invesco Ltd., which manages more than $500 billion, told Bloomberg Radio.

The S&P 500 has rebounded 4.3 percent from the almost three- year low set on July 15 as oil tumbled 21 percent. The index has still lost 14 percent in 2008 as subprime-related losses at global banks climbed above $500 billion and the U.S. economy teetered on the brink of a recession.

Stocks dropped yesterday after the Federal Reserve said business across most of the U.S. was ``slow'' last month as the housing market weakened. Almost all of the Fed's districts reported pressure to raise prices because of higher commodity costs, according to the central bank's Beige Book report.

Highest Since 2003

Caterpillar fell 3.3 percent to $65.51, GM lost 2.2 percent to $11.02 and Home Depot retreated 1.8 percent to $28.80. The number of Americans staying on jobless rolls rose to 3.435 million, the highest since November 2003, the Labor Department said. First-time claims for unemployment benefits increased by 15,000 to 444,000 in the week ended Aug. 30.

Ciena tumbled the most since August 2004, losing $3.67 to $13.76. Customers are delaying orders due to ``their guarded approach to capital expenditures given the uncertain macroeconomic environment,'' Ciena said. Fourth-quarter revenue will be $210 million at most, the company said. Analysts estimated $262.2 million on average.

Legg Mason fell $3.44 to $43.93. The company with stock funds managed by Bill Miller will likely report lower-than- estimated earnings as investors withdraw their money, Credit Suisse analysts said.

Stocks declined before the release of the Institute for Supply Management's non-manufacturing index, which captures almost 90 percent of the economy. The measure of service industries remained at 49.5 in August, unchanged from the prior month, according to the median estimate of economists surveyed by Bloomberg News. Fifty is the dividing line between growth and contraction.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.