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Stocks Sink Again on Inflation Worries

Stocks continued their recent descent Thursday, finishing lower amid interest-rate and inflation concerns in the wake of Wednesday's sharp decline. A pullback in Treasury yields after a surprisingly high jobless number gave stocks an early boost, but rebound hopes sputtered in the final hour of trading.

The Dow Jones industrial average fell 77.32 points, or 0.69%, to 11,128.29, despite leadership from Merck (MRK), Hewlett-Packard (HPQ) and Home Depot (HD). The broader Standard & Poor's 500 index dropped 8.51 points, or 0.67%, to 1,261.81. The tech-heavy Nasdaq composite sank 15.48 points, or 0.7%, to 2,180.32.

On the economic docket Thursday, initial jobless claims unexpectedly rose 42,000 to 367,000 for the week ended May 13. The leading indicators index unexpectedly fell 0.1% to 138.9 in April. The Philly Fed index rose to 14.4, modestly stronger than forecast.

In earnings news, Sears Holdings (SHLD) was sharply higher after the retailer reported a profit of $180 million, up from a loss of $9 million a year earlier.

Software developer BEA Systems (BEAS) was also sharply higher after posting 3% higher first-quarter profit. Credit Suisse lifted its share-price estimate on the stock.

Chinese online travel group (CTRP) was up after the company said its first quarter first-quarter profit rose 22%.

After the close, Dell (DELL) and Gap (GPS) are among companies set to report quarterly results.

Pharma company Merck (MRK) was higher ahead of an FDA advisory committee meeting on its Gardasil vaccine. Separately, new company data reportedly indicated that cardiovascular concerns linked to the painkiller Vioxx began four months after people started taking the drug.

Healthcare provider UnitedHealth Group (UNH) was lower on reports the company said it received subpoenas from the U.S. attorney for the Southern District of New York and the Internal Revenue Service over its stock-option grants.

Among other stocks in the news, Burger King (BKC) was higher in its first day of trading.

In the energy markets, June West Texas Intermediate crude oil futures closed up 76 cents at $69.45 a barrel.

European markets finished mixed. In London, the Financial Times-Stock Exchange 100 index edged lower 3.9 points, or 0.07%, to 5,671.6. Germany's DAX index rose 13.35 points, or 0.24%, to 5,666.07. In Paris, the CAC 40 index slipped 11.62 points, or 0.24%, to 4,908.69.

Asian markets finished lower. Japan's Nikkei 225 index fell 220.49 points, or 1.35%, to 16,087.18. In Hong Kong, the Hang Seng index tumbled 349.03 points, or 2.1%, to 16,266.52. Korea's Kospi index sank 36.32 points, or 2.59%, to 1,365.15.

Treasury Market

Treasury yields fell on the high jobless claims number and upbeat comments from both Richmond Fed President Jeffrey Lacker and St. Louis Fed President William Poole. Prices for 10-year Treasury notes rose to 100-14/32 with a yield of 5.07%, while 30-year bonds climbed to 89-24/32 for a yield of 5.18%. Poole said, "Market fears that the yield curve will invert and signal a recession have evaporated."

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