Stocks finished lower Thursday, giving up early gains as a reading on Philadelphia-area manufacturing activity dove more sharply than expected. Investors were also digesting Hewlett-Packard's (HPQ) ongoing leak probe scandal and price cuts on prescription drugs at Wal-Mart (WMT).
The Dow Jones industrial average fell 79.96 points, or 0.69%, to 11,533.23, pulling back from near record highs. The broader Standard & Poor's 500 index shed 7.15 points, or 0.54%, to 1,318.03. The tech-heavy Nasdaq composite dropped 15.14 points, or 0.67%, to 2,237.75.
NYSE breadth was negative, with 20 issues declining for every 14 advancing. Nasdaq breadth was 19-11 negative.
Economic reports continued to indicate a slowing economy Thursday. The Philadelphia Fed index tumbled to -0.4 in September, down from 18.5 in August. "This breaks a string of 14 straight monthly gains and is much weaker than expected," says Action Economics.
The Philly Fed index's slide was disturbing, some analysts say. "If this weakness in Philadelphia-area manufacturing is corroborated in other indicators for September (which we think is unlikely), then we will have to reconsider our view that the Fed will raise rates at one of the remaining meetings this year," says John Ryding, chief U.S. economist at Bear Stearns.
Elsewhere, leading indicators fell 0.2% in August after a downwardly revised 0.2% drop in July. Jobless claims rose 7,000 to 318,000 in the week ended Sept. 16, from a downwardly revised 311,000 a week earlier.
The economic calendar is quiet Friday, before kicking off next week with existing home sales data due Monday.
Oil prices rebounded Thursday after falling to their lowest levels since March. In the energy markets, November West Texas Intermediate crude oil futures closed up 85 cents at $61.59 a barrel.
Among stocks in the news, Hewlett-Packard lost 5% after the company said it would hold a press conference after the closing bell regarding its investigation of boardroom leaks. The news follows reports CEO Mark Hurd may have played a larger role in the probe than previously disclosed.
Retail giant Wal-Mart said it would cut prices to $4 per prescription on generic versions of nearly 300 prescription drugs. Drugstore shares dropped on the news.
Software maker Novell (NOVL) was lower as the company said it received a delisting warning from Nasdaq and a default notice from Wells Fargo Bank, both related to delayed financial reports because of an options probe.
Meanwhile, Tribune's (TRB) board called a meeting amid pressure from the publishing company's shareholders. The company will reportedly consider options including going private in a leveraged buyout or spinning off its TV unit.
Networking site Facebook.com was reportedly in discussions to sell itself to Yahoo! (YHOO) for as much as $1 billion, following separate talks with Microsoft (MSFT) and Viacom (VIA).
Investors were also digesting earnings news. FedEx (FDX) was lower after reporting a 40% increase in first-quarter profit. The company's outlook for the second quarter and full-year 2006 was lower than the consensus forecast.
Retailer Bed Bath & Beyond (BBBY) was up after posting a 2.9% rise in second-quarter profit on higher gross margins.
Shares of General Mills (GIS) gained after the packaged-foods maker said its first-quarter earnings rose 5.9%.
In analyst calls, Cisco (CSCO) was lower despite its stock being upgraded from market perform to outperform by Piper Jaffray.
European markets finished modestly higher. In London, the Financial Times-Stock Exchange 100 index rose 30.5 points, or 0.52%, to 5,896.7. Germany's DAX index added 7.65 points, or 0.13%, to 5,962.03. In Paris, the CAC 40 index was up 15.58 points, or 0.3%, to 5,208.32.
Asian markets ended higher. Japan's Nikkei 225 index gained 115.56 points, or 0.74%, to 15,834.23. In Hong Kong, the Hang Seng index advanced 107.01 points, or 0.61%, to 17,619.97. Korea's Kospi index edged up 0.35 points, or 0.03%, to 1,366.79.
Treasury yields skidded following the Philly Fed index plunge, the dip in leading indicators, and the increase in jobless claims. The 10-year note rose in price to 101-25/32 for a yield of 4.64%, while the 30-year bond climbed to 95-17/32 for a yield of 4.78%.