Stocks finished modestly lower in heavy trading Thursday, after plunging at the outset on a rise in the Japanese yen and worries about a global economic slowdown. A solid report on manufacturing, government officials' upbeat talk on the economy, and surprisingly strong General Motors (GM) auto sales helped major indexes briefly reach positive territory. But a higher inflation reading suggested other concerns.
On Thursday, the Dow Jones industrial average fell 34.29 points, or 0.28%, to 12,234.34, after gaining as many as 20 points and tumbling as many as 209 points throughout the day. The broader Standard & Poor's 500 index shed 3.65 points, or 0.26%, to 1,403.17. The tech-heavy Nasdaq composite dropped 11.94 points, or 0.49%, to 2,404.21.
NYSE breadth was negative, with 20 issues declining for every 13 advancing. Nasdaq breadth was 20-11 negative.
A spike in the Japanese yen's value around 6:00 am ET likely contributed to U.S. stock index futures selling ahead of the open, says S&P technical market analyst Chris Burba. "Hedge funds and other large institutions had borrowed yen when its value was declining and invested in other markets that offered higher yields, particularly emerging market equities," Burba notes.
Upcoming economic releases could cause the market to keep fluctuating. "I would anticipate continued volatity, certainly through the end of the week and possibly into next week," says Dean Junkans, chief investment officer at Wells Fargo Wealth Management Group. "We still have quite a bit of data coming out tomorrow and into early next week."
In economic news Thursday, U.S. personal income rose 1% in January while consumption climbed 0.5%. The Federal Reserve's preferred inflation measure, the core PCE deflator, inched higher to a year-over-year pace of 2.3%. The report was hotter than expected, says Action Economics.
The Institute for Supply Management's index of U.S. manufacturing activity unexpectedly climbed to 52.3 in February from 49.3 in January, countering Wednesday's soft reading for the Chicago purchasing manager's index.
U.S. construction spending dropped 0.8% in January, following an 0.6% gain in December that was revised upward from the 0.4% drop previously reported.
Meanwhile, U.S. initial jobless claims advanced 7,000 to 338,000 in the week ended Feb. 24, after a downwardly revised 331,000 a week earlier. Weather and a holiday-shortened week may have been factors.
Former Fed chief Alan Greenspan, whose remarks on a "possible" recession raised concerns earlier this week, sounded a more soothing note Thursday. Greenspan said a recession, while possible, remains unprobable this year because excess inventory is being reduced quickly, Bloomberg reports.
Separately, Treasury Secretary Henry Paulson said the economy is "healthy" and making the transition to a moderate, sustainable rate of growth.
Investors were also digesting February auto sales. GM reported a 4% increase from a year earlier. Analysts were expecting a drop of up to 10%, says Action Economics. Toyata (TM) led gainers with a 12% year-over-year increase, while Ford (F) and DaimlerChrysler (DCX) posted declines.
Investors were slated for a report on consumer sentiment Friday, ahead of another busy economic docket next week.
Among Thursday's stocks in the news, Oracle (ORCL) was reportedly close to a deal to buy fellow software maker Hyperion Solutions (HYSL).
Amgen (AMGN) was lower after the drugmaker received an informal inquiry from the SEC regarding a Danish study of the company's Aranesp anemia drug.
Motorola (MOT) was higher on news billionare investor Carl Icahn plans to buy about $2 billion of the wireless company's stock.
Elsewhere, American International Group (AIG) agreed to buy term life insurance market Matrix Direct from Protective Life (PL). Financial terms weren't disclosed.
In earnings news, Limited Brands (LTD) was lower after the clothing retailer reported a 15% drop in fourth-quarter net income.
Office-supplies retailer Staples (SPLS) was down after the company said fiscal fourth-quarter profit rose 22%.
Shares of Sears Holdings (SHLD) fell despite posting fourth-quarter results that topped analyst exepctations.
In the energy markets, April West Texas Intermediate crude oil futures recovered from early losses to rise 11 cents to $61.90 a barrel.
European markets finished lower, but bounced back from session lows. The FTSE-100 index in London fell 43.7 points, or 0.71%, to 6,127.8. Germany's DAX index dropped 75.2 points, or 1.12%, to 6,640.24. In Paris, the CAC 40 index was down 57.92 points, or 1.05%, to 5,458.4.
Asian markets ended lower for a third straight day. In Japan, the Nikkei 225 index lost 150.61 points, or 0.86%, to 17,453.51. In Hong Kong, the Hang Seng index skidded 304.91 points, or 1.55%, to 19,346.6.
Treasury yields ticked lower, rebounding from early declines as the solid ISM report countered recession fears. The 10-year note rose in price 07/32 to 101-21/32 for a yield of 4.54%. The 30-year advanced 10/32 to 101-10/32 for a yield of 4.67%.