Labor, trade worries dampen mood

NEW YORK — Wall Street surrendered early gains and closed lower Thursday as a higher U.S. trade deficit and questions about the labor market squelched enthusiasm over a policy change at the Bank of Japan.

The Dow Jones industrial average fell 33.46 to 10,972.28.

Microsoft, one of the 30 Dow stocks, slipped 25 cents to close at $27 a share. Boeing, also a Dow stock, gained 94 cents to $73.76.

Broader stock indicators also fell. The Standard & Poor's 500 index lost 6.24 to 1,272.23, and the Nasdaq composite index dropped 17.74 to 2,249.72.

The market was cheered after the Japanese central bank signaled an end to its current interest-rate policy, set in place five years ago to fight inflation and also lift a sagging economy. The new policy, focused less on rising prices and more on Japan's growing economic strength, encouraged U.S. investors worried about the Federal Reserve's stance on interest rates and inflation.

"Now you have the Bank of Japan, the European Central Bank and the Federal Reserve all with the same interest-rate policy, and that's very positive," said Peter Cardillo, chief strategist, and senior vice president at S.W. Bach. "It's a strong indication that global central bankers will contain inflation and not necessarily choke off economic activity, which has been a big concern here."

However, the session's gains slipped away by early afternoon as investors focused on increasing unemployment claims, which climbed above the 300,000 mark for the first time in eight weeks, and awaited the Labor Department's monthly job-creation report, due today.

A new record for the nation's trade gap also darkened investors' mood, which has soured in recent days amid continued uncertainty over the economy and the Fed's interest-rate policy.

Investors were somewhat uneasy as they awaited the monthly job-creation report, due today. The state of the labor market could give Wall Street insight into wage inflation — a key component of the Fed's interest-rate policy.

"The market is preparing for a pretty good bounce in employment," said Michael Strauss, chief economist for Commonfund. "What that means, though, is some more concern about inflation as demand increases."

The Fed doesn't meet until the end of the month, giving investors time to worry about individual economic reports and likely preventing a sharp move higher in stocks until then.

Dow industrial General Motors added 92 cents to $21.34 as The Wall Street Journal reported that GM and bankrupt auto-parts maker Delphi are close to a cost-cutting labor agreement. Such an agreement would avoid a possible strike at Delphi that could cripple GM's production. The United Auto Workers union strongly disputed the report, however.