Stocks finished lower Thursday, despite a slide in oil futures, after a surprisingly strong labor report fanned interest-rate fears. Bulls lacked the conviction to sustain intraday gains in the Nasdaq and small-cap indexes, while volume trended lower, says Standard & Poor's MarketScope.
The Dow Jones industrial average fell 67.95 points, or 0.61%, to 11,069.22, led down by General Motors (GM) after reaching a multi-year high Wednesday. The broader Standard & Poor's 500 index dipped 4.88 points, or 0.38%, to 1,287.79. The tech-heavy Nasdaq composite index edged lower 3.85 points, or 0.17%, to 2,279.32.
Uncertainty surrounding the end of the Fed's tightening cycle limited upside potential, according to the the S&P Investment Policy Committee. "Continued cost inflation pressures and tight labor conditions may keep upward pressure on interest rates longer than currently perceived," says Thomas McManus, chief investment strategist with Banc of America. "It's likely large-cap stable growth will hold up better if earnings falter."
Investors were digesting solid economic news Thursday. Jobless claims fell 20,000 to 278,000 for the week ended Feb. 18. The markets were expecting an increase of 13,000, says Action Economics.
The numbers came in the wake of the Fed's indications that future rate hikes will depend on economic data. Markets will also be watching Friday's January durable-goods orders, followed by consumer confidence and the Institute for Supply Management's figures next week.
Among stocks on the move, Fannie Mae (FNM) rose 2% in afternoon trading after a report assigned responsibility for the company's accounting troubles to former top executives. Homebuilder Toll Brothers (TOL) ticked 1% higher on a 49% jump in first-quarter earnings.
In other corporate news, Wal-Mart (WMT) was modestly higher after announcing plans to offer employees improved healthcare benefits. Dow component Alcoa (AA) giant said it expects sales in China to surge 40% in 2006, but shares in the aluminum giant were almost 1% lower.
In the media sector, Viacom (VIA) slipped 2% after posting a 67% drop in fourth-quarter profit. Television and radio company CBS (CBS), which recently split from Viacom, reported adjusted fourth-quarter earnings of 41 cents per share, just ahead of forecasts. Shares were little changed.
On the brokerage front, pharmaceutical giant Merck (MRK) fell more than 1% after Friedman Billings Ramsey cut the company from market perform to underperform. The same brokerage boosted rival Pfizer (PFE) to outperform, but shares were little changed.
Companies reporting earnings Friday include KeySpan (KSE), National Oilwell Varco (NOV) and Nicor (GAS).
In the energy markets Thursday, April West Texas Intermediate crude oil futures settled down 47 cents at $60.54. The session's weekly inventory report showed a 1.1 million barrel rise in supplies, in line with expectations, says Action Economics.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 36.4 points, or 0.62%, to 5,836. Germany's DAX index dipped 4.18 points, or 0.07%, to 5,857.88. In Paris, the CAC 40 index edged lower 1.21 points, or 0.02%, to 5,040.39.
Asian markets finished sharply higher. Japan's Nikkei 225 index rallied 314.32 points, or 1.99%, to 16,096.1. In Hong Kong, the Hang Seng index rose 176.81 points, or 1.13%, to 15,812.53. Korea's Kospi index climbed 20.65 points, or 1.54%, to 1,361.23.
Prices for 10-year Treasury notes fell to 99-18/32 with a yield of 4.56%, while 30-year bonds declined to 99-30/32 for a yield of 4.5%. Inversion in the yield curve was keeping alive concerns over the economy, says S&P MarketScope.