U.S. stock indexes closed modestly lower Thursday, pulling the S&P 500 index down from 11-month highs. Trading was choppy as the market also absorbed buying and selling based on the expiration of options.
A fresh supply of economic data did little to inspire investors. Reports showed a larger-than-expected jump in the Philadelphia Fed index, a rise in housing starts that was in line with market forecasts, and a smaller-than-expected drop in initial jobless claims but a surge in continuing claims.
On Thursday, the 30-stock Dow Jones industrial average finished lower by 7.79 points, or 0.08%, at 9,783.92. The broad Standard & Poor's 500-stock index shed 3.27 points, or 0.31%, to 1,065.49. The tech-heavy Nasdaq composite index was down 6.40 points, or 0.30%, to 2,126.75.
On the New York Stock Exchange, 17 stocks were lower in price for every 13 that advanced. Nasdaq breadth was 14-13 negative.
Treasuries rose. The dollar index edged higher. Gold futures fell. Crude oil futures were mixed.
Investors appeared to be disappointed by news Thursday that FedEx (FDX) profits fell 53%, and the company failed to beat earnings estimates.
After the close of trading Wednesday, business software designer Oracle (ORCL) slipped after reporting slightly lower sales than forecast, though earnings were in line with expectations.
American Airlines parent company AMR (AMR) received a $2.9 billion credit line and leasing facility, boosting its shares over 24%.
In economic news Thursday, the U.S. Philadelphia Fed index surged to 14.1 in September after climbing almost 12 points to 4.2 in August. The index was at 3.8 a year ago. However, the employment component index slipped to -14.3 from -12.9 previously (-0.9 last September), highlighting ongoing weakness in the labor market. New orders slipped to 3.3 from 4.2 (5.6 a year ago) as the pace of expansion slowed. Shipments climbed to 8.2 from 0.6 (2.6 a year ago). Prices paid rose to 14.9 from 10.0 (31.5 last September). Prices received dropped to -10.6 from -1.5 (15.5 last year). The 6-month ahead general business activity index dipped to 47.8 from 56.8, though employment rose to 20.5 from 12.9.
Initial jobless claims fell 12,000 to 545,000 in the week ended September 12. The reading is better than the 560,000 expected by markets, though Labor Day distortions may reduce some of its impact on markets. Continuing claims surged 129,000 to a 6,230,000 pace in the week ended September 5, only partially erasing the 165,485 drop seen the prior week. The insured unemployment rate climbed to 4.7% from 4.6% reported the prior week.
U.S. housing starts were up 1.5% to a 598,000-unit annual rate in August. This was about in line with the 595,000 pace that markets had expected, but comes after upward revisions to the prior two months. On a year over year basis, housing starts are down 29.6%, better than the -36.9% pace in July.
Morgan Stanley's David Greenlaw doesn't think the housing starts report was "quite as positive as the headline reading suggested because all of the upside in August was concentrated in the volatile multi-family category." He also noted the initial jobless claims fall of 12,000 to 545,000 apparently surprised investors who had been looking for an increase to 575,000-580,000.
Besides AMR, a number of other companies announced financing moves Thursday. Prudential Financial (PRU) said that Nippon Life Insurance Company had signed a definitive agreement to purchase a $500 million 10-year exchangeable surplus note issued by The Prudential Insurance Company of America. Under the terms of the transaction, Nippon Life can exchange the surplus note for shares of Prudential Financial common stock at any time, at Nippon Life's option, beginning on the fifth anniversary of issuance of the note.
Eastman Kodak (EK) said it expects to raise up to $700 million through a series of financing transactions, including a commitment from Kohlberg Kravis Roberts & Co. L.P. (KKR) managed investment vehicles to purchase up to $400 million in senior secured notes due 2017. Kodak also agreed to issue KKR warrants to purchase up to 53 million common shares. The company also plans private placement of $300 million aggregate principal amount of convertible senior notes due 2017.
Synovus Financial (SNV), Rigel Pharmaceuticals (RIGL), and Vivus (VVUS) all made announcements related to public equity offerings Thursday.