Stocks finished lower Thursday, following weak economic data pointing to a tame pace of interest-rate hikes. Violence in Turkey and Iraq also weighed on sentiment.
The Dow Jones industrial average fell 35.76 points, or 0.34%, to 10,443.81. The broader Standard & Poor's 500 index was down 3.44 points, or 0.3%, to 1,140.62. The tech-heavy Nasdaq composite index lost 5.41 points, or 0.27%, to 2,015.57.
The declines were led by telecom outfits on negative news from AT&T (T), while cyclicals also suffered amid the weak durable goods orders report. On the plus side, homebuilders were boosted by record new home sales in May, casinos were up on news that the Pennsylvania legislature is on track to approve slot machines, and gold stocks rose on a weak dollar.
In economic news Thursday, May durable goods orders fell 1.6%, well below an expected 1.6% rise. The report revealed widespread weakness for orders, shipments, and inventories, though the weakness was slightly mitigated by upward revisions in nearly all of the April data, says economic research outfit Action Economics.
A labor market indicator also disappointed investors. Initial jobless claims for the week ended June 19 rose 13,000 to 349,000, vs. an expected 4,000 increase.
New home sales rebounded 14.3% in May to a 1.369 million rate, following April's revised 7.9% decline to a 1.192 million pace (1.093 million previously). May's pace is much firmer than expected and makes April's drop look flukish, says Action Economics.
Friday brings the final gross domestic product figures. Action Economics expects U.S. economic growth to be trimmed down to a still-healthy 4.0% from 4.4%, due to revisions in the trade report, though the median forecast has remained at 4.4%.
Also coming Friday is Michigan's consumer sentiment survey results for June and existing home sales.
In world events, Iraq troubles escalated, with a series of bomb attacks reported in Mosul and Baghdad. In Turkey, a blast in Istanbul killed at least three people, ahead of the NATO summit this weekend. There were also explosions near the Ankara hotel where President George Bush is set to stay during the summit.
Among stocks on the move Thursday, AT&T (T) shares fell almost 10% after the company says that due to changes in regulatory environment and escalating pricing pressure, it cut its 2004 revenue guidance to $29.5 billion to $30.5 billion. AT&T plans to scale back marketing efforts as regulators side with the Baby Bells concerning local rates AT&T must pay. CS First Boston and Bear Stearns downgraded the stock to underperform.
Corinthian Colleges (COCO) shares skidded around 10% on a Financial Times report that the U.S. Dept. of Education uncovered violations in federal loan requests at Corinthian's Bryman College campus.
Another education provider, Apollo Group (APOL), fell after the company reported third-quarter earnings per share of 56 cents, vs. 39 cents a year ago, on 37% higher total consolidated revenue. It sees $483 million to $486 million for fourth-quarter revenue.
In the tech sector, Micron Technology (MU) reported better-than-expected third-quarter earnings per share of 13 cents, vs. a 36 cents loss a year ago, on a 52% sales rise. The stock fell slightly.
Retailer Bed Bath & Beyond (BBBY) reported first-quarter EPS of 27 cents, up from 19 cents a year ago, on 5.1% higher same-store sales and 23% higher net sales. The stock edged slightly lower.
Other companies on Thursday's earnings calendar were Nike (NKE), Family Dollar Stores (FDO), Rite Aid (RAD), Paychex (PAYX), PalmSource (PSRC), and more.
There are no major companies scheduled to report earnings on Friday.
In merger news, America Online, a unit of Time Warner (TWX), agreed to pay $435 million for Advertising.com, a provider of pay-for-performance advertising services.
Separately, Time Warner says that earlier in 2004, AOL began litigation against major spammer, and discovered that an AOL employee had stolen member screen names in 2003, which AOL believes were used to send junk email. The employee was arrested.
Treasury prices rose, sending yields plunging, following the series of attacks in Iraq and Turkey along with the string of damp U.S. economic indicators. The bullish combination triggered additional short-covering, driving the benchmark 10-year note yield down to 4.65%, says Action Economics.
European stock markets finished higher. London's FTSE 100 index was up 16.5 points, or 0.37%, to 4,503.2. A CBI report showed Britain's manufacturing sector has lost some steam, and some say this will reduce chances of a potential Bank of England rate hike next month.
Germany's DAX index rose 61.95 points, or 1.57%, to 4,007.05 in a spillover of Wednesday's late U.S. rally. In Paris, the CAC 40 index gained 35.61 points, or 0.96%, to 3,755.75 as Finance Minister Sarkozy outlined steps to cut 2005 deficit, and predicted a strong economy.
Asian markets finished with solid gains Thursday. In Japan, the Nikkei index gained 163.59 points, or 1.41%, to close at 11,744.15. The index was boosted by gains in tech names after U.S. peers rallied overnight and on optimism that the Bank of Japan's tankan corporate sentiment survey -- due out on July 1 -- will show a strong reading, says Standard & Poor's MarketScope. Banks got a lift after S&P Ratings raised ratings on eight major Japanese banks on Wednesday. Furakawa Electric shares rose after Nikko Citigroup upgraded the stock to a buy from sell. Nissan Motor jumped on news that it aims to pay higher dividend.
In Hong Kong, the Hang Seng index jumped 313.91 points, or 2.65%, to close at 12,163.68, with China plays continuing to lead gains.