Stocks finished modestly lower Thursday, though improved from early lows, as signs of weakness in the housing market countered solid January retail sales reports. A late rally in oil prices helped energy shares.
On Thursday, the Dow Jones industrial average fell 29.24 points, or 0.23%, to 12,637.63. The broader Standard & Poor's 500 index slipped 1.71 points, or 0.12%, to 1,448.31. The tech-heavy Nasdaq composite was down 1.83 points, or 0.07%, to 2,488.67.
NYSE breadth was slightly negative, with 17 issues declining for every 16 advancing. Nasdaq breadth was flat.
Among Thursday's stocks in focus, HSBC Holdings (HBC) was lower after the European banking giant said it would set aside $10.6 billion for bad debts, 20% more than analysts had expected, due to problems with its portfolio of U.S. subprime mortgages.
Fellow mortgage lender New Century Financial (NEW) was sharply lower following a warning that loan production in 2007 would fall 20% from last year's levels.
Recent troubles for the housing market could continue. Homebuilder Toll Brothers (TOL) was lower after the company said it expects first-quarter home building revenue to decline by 19%.
Meanwhile, retailers were reporting firm January sales results. Companies beating Wall Street estimates included Wal-Mart (WMT), Federated (FD), Limited Brands (LTD), and even recently beleaguered Gap (GPS). Costco (COST), AnnTaylor (ANN), and Bebe (BEBE) were among the disappointments.
Worries that interest rates will continue to rise hampered financial-services stocks. The European Central Bank left its key lending rate unchanged at 3.5%, but President Trichet said strong vigilance will be needed to maintain price stability.
The Bank of England also kept borrowing charges unchanged, at 5.25%, after surprising the world with a rate hike of 25 basis points in December.
Oil prices spiked in their final hour of trading Thursday, supporting corresponding shares. In the energy markets, March West Texas Intermediate crude oil futures rose $2 to $59.71 a barrel after Occidental Petroleum (OXY) declared a "force majeure" as a fire at a California refinery proved worse than originally thought.
In earnings news, Disney (DIS) was slightly lower after the Dow component reported a sharp jump in earnings for its fiscal first quarter.
PepsiCo (PEP) was lower after the snack and beverage maker posted a 61% rise in fourth-quarter profit, in line with expectations. Stifel Nicolaus downgraded the stock from buy to hold.
Qwest (Q) was lower despite swinging to a fourth-quarter profit of $194 million.
Outside of earnings, Eastman Kodak (EK) was lower as the digital imaging company said it is cutting as many as 4,000 more jobs.
Elsewhere, a government report suggested the economy may be improving. U.S. wholesale sales jumped 1.8% in December, stronger than expected, from a downwardly revised 0.9% pace in November.
Jobless claims rose 311,000 for the week ended Feb. 3, up from a revised 308,000 a week earlier.
A quiet economic calendar Friday is highlighted by remarks from St. Louis Federal Reserve President William Poole.
European markets finished lower Thursday. The FTSE-100 index in London fell 23.1 points, or 0.36%, to 6,346.4. Germany's DAX index dropped 38.83 points, or 0.56%, to 6,876.73. In Paris, the CAC 40 index was down 37.9 points, or 0.66%, to 5,665.1.
Asian markets ended mixed. In Japan, the Nikkei 225 index edged up 0.16 points, or less than 0.01%, to 17,292.48. In Hong Kong, the Hang Seng index gained 55.36 points, or 0.27%, to 20,735.05. Korea's Kospi index shed 2.71 points, or 0.19%, to 1,423.58.
Treasury yields drifted lower amid firm demand for the Treasury Department's 30-year bond auction. The 10-year note edged up in price to 99-07/32 for a yield of 4.72%, while the 30-year bond rose to 94-25/32 for a yield of 4.84%. None of the session's economic reports had a noticeable effect on Treasuries, says S&P.