Wall St down on disappointing jobless news

Stocks in the US dropped for a third straight day as a worse-than-expected report on US jobless claims bolstered concern about the troubled labour market in the world's largest economy.

The number of US workers filing new claims for unemployment benefits rose by 2,000 to 484,000 last week, the highest level since mid-February, according to the Labor Department.

Economists forecast claims would fall to 465,000, according to the median of 42 projections in a Bloomberg News survey.

"Bears have the upper hand today because claims were so much worse than expected," Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles, told Reuters.

"It adds to their case that we're not getting any jobs growth, which means people won't be able to spend and the economy won't be able to recover."

In late trading, the Dow Jones Industrial Average declined 0.42 per cent, the Standard & Poor's 500 Index fell 0.43 per cent and the Nasdaq Composite Index shed 0.75 per cent.

Exacerbating investors' concern was a worse-than-expected revenue outlook from Cisco Systems. The world's largest maker of networking equipment plunged 9.4 per cent.

Cisco CEO John Chambers' warning of "unusual uncertainty" and Cisco's weaker-than-expected revenue forecast forced investors to reconsider their views of technology stocks following stellar results from Intel Corp last month.

Chambers was one of the first technology CEOs in 2007 to flag the impact of troubles in the US financial sector, warning of a dramatic decline in orders even as others said they were not affected.

Other active stocks on Wall Street were Caterpillar, Juniper Networks and Estee Lauder.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street's 'fear gauge', rose 1.73 per cent to 25.83 in New York. The index measures the cost of using options as insurance against declines in the Standard & Poor's 500 Index.

The Stoxx Europe 600 Index rose 0.1 per cent to 254.93, climbing for the first time in three days.

The U.K.'s FTSE 100 rose 0.40 per cent.

France's CAC 40 declined 0.20 per cent and Germany's DAX lost 0.31 per cent.

Among the most active stocks in Europe were Anheuscher-Busch InBev, Bayerische Motoren Werke, HeidelbergCement and Q-Cells.

US Treasuries fell. The government's US$16 billion long-bond auction drew the lowest yield in more than a year before reports tomorrow on retail sales and inflation.

The yield on the two-year note increased 2 basis points, or 0.02 percentage point, to 0.54 per cent at 2.08pm in New York, according to BGCantor Market Data. The yield touched 0.4892 per cent yesterday, a record low.

The current 30-year bond yield fluctuated, last up 1 basis point to 3.93 per cent.

At today's bond auction, the securities drew a yield of 3.954 per cent, the lowest since a sale of the securities in March 2009. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount offered, was 2.77, versus 2.89 at the previous sale and an average for the past 10 offerings of 2.61, according to Bloomberg.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.37 per cent to 82.60.

The US dollar rose against major currencies, extending the previous day's gains. The greenback rose 0.8 per cent to 85.84 yen.

The euro earlier slid to a three-week low against the greenback after figures showed Greece's economy shrank more than expected in the second quarter, while euro zone industrial production unexpectedly declined in June.

The euro fell as low as US$1.2782, according to Reuters data.

It was last up 0.2 per cent at $1.2856.

Benchmark three-month dollar Libor fell 0.8 basis points to 0.37625 per cent, its lowest daily fixing since early May.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, edged 0.02 per cent higher to 268.89.

Oil dropped to the lowest level in two weeks on concern about demand for fuel.

US crude for September delivery was down US$1.27 at U$76.75 a barrel at 1520 GMT. It earlier dropped as low as US$76.05, the lowest for front-month crude since July 28.

Brent crude traded at US$76.37, down US$1.28.

Gold prices rose as disappointing US economic data further eroded investor confidence, prompting a surge of interest in perceived safe-haven assets.

New York precious metals brokers told Reuters that buy stops were triggered after the jobless claims data, and as investors opted to cover their short positions to avoid losses as prices kept rising.

Gold was at US$1,213.45 an ounce by 1552 GMT, against US$1,197.00 late in New York on Wednesday.