Stocks ended moderately lower on Thursday, as mixed indications from the Federal Reserve, the labor market and the earnings front prompted some selling in the equity markets. With the declines, the major averages pulled back further off their recent highs.
The markets came under pressure in the early afternoon following some unsettling comments from St. Louis Federal Reserve Bank President James Bullard, who spooked the markets when he said that the Fed's current policies are putting the U.S. at risk for "a Japanese-style deflationary outcome within the next several years."
While Bullard said the most likely course for the U.S. economy is a gradual recovery, he said that if prices drop, the Fed should think about buying more Treasury securities instead of promising to keep interest rates low for an "extended period."
Early gains in the markets were seen as the markets focused on a decline in jobless claims and the silver lining in a mixed bag of earnings reports.
Before the start of trading, the Labor Department released a report showing that jobless claims in the week ended July 24th dropped to 457,000 from the previous week's revised figure of 468,000. Economists had been expecting jobless claims to edge down to 460,000 from the 464,000 originally reported for the previous week.
In earnings news, Exxon Mobil Corp. (XOM) and Colgate-Palmolive Co. (CL) both reported second quarter earnings estimates that beat Wall Street projections but fell short of revenue expectations. Meanwhile, Motorola Inc. (MOT) reported adjusted second-quarter earnings and sales that were ahead of estimates.
After the markets closed for trading in the previous session, Japanese electronics giant Sony Corp. (SNE) reported a profit for the first quarter of fiscal 2011 compared to a loss in the same period last year. The company also raised its full year earnings guidance.
The major averages saw some downside in late-session dealing, slipping back into negative territory. The Dow fell by 30.72 points or 0.3 percent to 10,467.16, the Nasdaq declined by 12.87 points or 0.6 percent to 2,251.69 and the S&P 500 slid by 4.60 points or 0.4 percent to 1,101.53.
Sector News
Networking stocks were among the day's worst performers, with the NYSE Arca Networking Index falling by 3 percent. The decline took the index further off of a two and a half month closing high set on Monday.
Utilities, semiconductor, computer hardware and internet stocks also moved notably lower, with the Philadelphia Utility Sector Index posting a loss of 1.6 percent. The pullback dragged the index further off of Tuesday's six and a half month closing high.
On the other hand, brokerage and oil service stocks saw strong gains, limiting the pullback by the major averages.
Buying interest in the brokerage sector was chiefly driven by strong quarterly results from Ameriprise Financial (AMP), which soundly beat second quarter earnings estimates. The stock shot up by 12.3 percent on the day, setting a two and a half month closing high.
Oil service stocks also ended higher as September crude oil added $1.37 to end at $78.36 a barrel, its first gain in five sessions.
Dow Components
Kraft (KFT) was notably lower in the Dow, posting a loss of 2.1 percent and pulling back further off of Tuesday's five-week closing high.
Procter & Gamble (PG), Hewlett Packard (HPQ) and Intel (INTC) also sank by more than one percent, further contributing to the Dow's modest loss.
Meanwhile, moderate upside by Merck (MRK), General Electric (GE) and Chevron (CVX) helped to offset some of the aforementioned losses.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region saw a mixed close on Thursday. Japan's benchmark Nikkei 225 inched fell by 0.6 percent, Hong Kong's Hang Seng Index was nearly flat and India's BSE 30 Index gained 0.2 percent.
Meanwhile, the major European markets all ended the day in the red after seeing a late-day sell off. The U.K.'s FTSE 100 Index slid by 0.1 percent, while the French CAC 40 Index and the German DAX Index fell by 0.5 percent and 0.7 percent, respectively.
In the bond markets, treasuries ended nearly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed at 2.999 percent, posting a loss of less than one basis point.
Looking Ahead
Friday, the markets are likely to focus on the advance reading on second quarter GDP, along with reports on Chicago-area business conditions and consumer sentiment.
In earnings news, the markets will likely look to quarterly results from Chevron (CVX), Merck (MRK) and Amgen (AMGN), among many others.
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