Major stock indexes finished lower for a second straight session Thursday, led down by the tech sector after disappointing guidance from Apple (AAPL). Reports on consumer prices, housing starts, and Philadelphia-area manufacturing pointed toward a solid economy, but Federal Reserve Chairman Ben Bernanke's Senate testimony raised concerns about fiscal policy, says Standard & Poor's Equity Research.
On Thursday, the Dow Jones industrial average edged down 9.22 points, or 0.07%, to 12,567.93. The broader Standard & Poor's 500 index fell 4.25 points, or 0.3%, to 1,426.37. The tech-heavy Nasdaq composite slid 36.21 points, or 1.46%, to 2,443.21.
NYSE breadth was negative, with 20 issues declining for every 13 advancing. Nasdaq breadth was 22-9 negative on the exchange's heaviest volume so far this year.
Investors were sifting through a barrage of firm economic data Thursday. The U.S. consumer price index, or CPI, rose 0.5% in December, while the core CPI rose 0.2%. The headline gain was larger than expected, says Action Economics.
The Philadelphia Fed's index of regional manufacturing activity added to the solid economic news. The Philly Fed index rebounded to 8.3 in January, much better than expected, from a revised -2.3 in December.
Meanwhile, U.S. housing starts climbed 4.5% to a 1.642 million rate in December, from a downwardly revised 1.572 million in November. In addition, U.S. jobless claims fell 8,000 to 290,000 in the week ended Jan. 13, from a downwardly revised 298,000 a week earlier.
The numbers may keep the Fed on hold with a bias toward further interest-rate hikes, some analysts say. "Interest rates will continue to be pressured higher, but the process should be slow," says Tom Sowanik, chief investment officer at Clearbrook Research, a part of Clearbrook Financial. "Stocks will respond to earnings, and the earnings appear to be coming in strong once again."
In Washington, Bernanke's prepared remarks to the Senate Banking Committee focused on fiscal policy, saying the nation faces huge problems with entitlements for the elderly. The Fed chief avoided discussion of the economic outlook or monetary policy.
Looking ahead, Friday's economic docket holds a preliminary reading for the University of Michigan's consumer sentiment index.
The tech sector paced the stock market's losses Thursday. Shares of Apple (AAPL) fell after the tech bellwether said second-quarter sales will be as much as $4.9 billion, less than analysts forecast. J.P. Morgan downgraded the stock from overweight to neutral.
Oil prices tumbled, weighing on corresponding shares. In the energy markets, February West Texas Intermediate crude oil futures skidded $1.76 to $50.48 a barrel, briefly dipping below $50, after an inventory report showing an unexpectedly large increase in supplies.
In earnings news, Merrill Lynch (MER) was lower despite pulling near a 52-week high in intraday trading after the company reported fourth-quarter profit that topped Wall Street expectations.
IBM (IBM) was among companies set to announce quarterly results after the bell. Companies reporting earnings Friday include Citigroup (C), General Electric (GE) and Motorola (MOT).
On the M&A front, GE reportedly plans to buy part of Abbott Laboratories' (ABT) diagnostic-equipment unit for about $8 billion.
Rite Aid (RAD) shareholders approved the drugstore chain's acquisition of 1,850 Brooks and Eckerd stores from the Jean Coutu Group.
Among Thursday's other stocks in the news, Electronic Arts (ERTS) was higher after Citigroup raised its recommendation on the stock from hold to buy.
Shares of Intuit (INTU) rose after Citigroup upgraded the software maker from hold to buy.
European markets finished mixed, paring early gains. The FTSE-100 index in London rose 5.8 points, or 0.09%, to 6,210.3. Germany's DAX index fell 12.08 points, or 0.18%, to 6,689.62. In Paris, the CAC 40 index was down 6.74 points, or 0.12%, to 5,555.04.
Asian markets ended higher. In Japan, the Nikkei 225 index gained 109.58 points, or 0.63%, to 17,370.93. In Hong Kong, the Hang Seng index climbed 212.94 points, or 1.06%, to 20,277.51. Korea's Kospi index advanced 3.73 points, or 0.27%, to 1,383.21.
Treasury yields ticked lower after a round of solid economic data. The 10-year note rose in price to 99-01/32 for a yield of 4.75%, while the 30-year bond advanced to 94-22/32 for a yield of 4.84%. A late rally in prices possibly reflected short covering after recent losses, says S&P.