Stocks finished Thursday with modest losses, as investors wrestled with mixed economic data and news that Pakistani troops were closing in on a key al-Qaida leader. Technology shares were dragged down by Microsoft’s antitrust problems in Europe.
The Dow Jones industrial average spent the morning in negative ground, losing as much as 86 points by midsession. But the index perked up and pushed into positive ground shortly after 1 p.m. ET after Pakistani officials said forces had surrounded Osama bin Laden’s top lieutenant, Ayman al-Zawahri, near the Afghan border.
The Dow index moved in and out of positive ground for the rest of the day, eventually finishing the day down 4.52 points, or 0.04 percent. The broader Standard & Poor’s 500-stock index also scaled back its early losses and closed the day off 1.43 points, or 0.1 percent.
Rumors of the capture of top al-Qaida leaders have swirled around Wall Street all week as Pakistani troops have launched a new offensive against suspected al-Qaida fighters near the Afghan border. Still, stocks haven't moved said Arthur Cashin, UBS PaineWebber's head of floor trading at the New York Stock Exchange.
But Thursday’s report had greater credibility, as it came from Pakistani President Pervez Musharraf. “But right now the jury’s still out and the bird isn’t in the hand,” he added in a CNBC interview.
A.C. Moore, chief investment strategist at Dunvegan Associates, said the stock market's late-day volatility was partly attributable to this week’s so-called "quadruple witching," the simultaneous expiration of stock options, index options, futures and single-stock futures, which can cause large swings in stock prices.
“It seems like some options expirations were rushed and it was exacerbated to the buy side,” Moore said.
Thursday’s early pull-back was expected after two sessions of gains, which some analysts characterized as a short-term bounce within a larger downward trend. Investor confidence continues to sag on concerns about the sluggish job market, listless bond yields, inflationary pressures and political uncertainty at home and overseas.
“There are some who believe we’ve had a classic 10 percent correction and that this is a good buying opportunity, but I tend to think we’ll see the market correct a bit more,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities.
“There are so many factors making the downside the path of least resistance ... investors are acting more conservatively and taking defensive positions,” Palazzi added.
The Nasdaq composite index finished Thursday down 14.32 points, or 0.7 percent, as software giant Microsoft, which trades on the Nasdaq market, faced hefty fines and other sanctions in Europe following the breakdown of talks with antitrust officials there.
Investors seemed unimpressed with the Labor Department’s report that claims for unemployment benefits fell last week to their lowest level in more than three years, surprising analysts who had forecast a slight increase after two weeks of declines.
The news raised hopes that the pace of layoffs had slowed to a point where businesses might begin rehiring workers in larger numbers.
In another report, the government said inflation at the wholesale level jumped by 0.6 percent in January, reflecting the largest jump in energy prices since the start of the Iraq war. The data were released a month late because of recent changes to the system used for tracking price changes.
Crude oil was trading at $37.93 a barrel, down 25 cents from the 14-year price peak it reached Wednesday, but still high enough to make investors nervous. Dwindling stockpiles and rising demand could drive prices higher still. U.S. car owners may be paying more than $2 per gallon this summer if the trend continues.
The U.S. dollar fell against other major currencies Thursday, and gold rose. A dip in Treasury prices pushed the yield on the 10-year note to 3.75 percent, well inside the range its held for several months.
Separately, the Conference Board’s Index of Leading Economic Indicators held steady last month, in line with analyst forecasts. The index, a closely watched indicator of future economic activity, was still considered high enough to signal more economic strength and job growth on the horizon.
Microsoft Corp. fell 24 cents to $24.89 after last-ditch settlement talks with European regulators failed, and a draft antitrust decision against the software maker is expected to be adopted next week.
Microsoft could also be fined hundreds of millions of dollars for grabbing market share from rival companies by “bundling” its own version of their products with Windows, the operating system in the majority of personal computers worldwide.
Morgan Stanley was down 55 cents at $59.91 after beating Wall Street expectations with a 35 percent rise in net income. The financial-services firm follows Lehman Brothers Inc. and Bear Stearns Cos. in reporting gains from the strengthening stock market.
Kmart Holding Corp. added $2.38, or 6.9 percent, to $37.06, after announcing its first profitable quarter since emerging from bankruptcy last year, but the discount retailer’s same-store sales continued to fall.
Decliners outnumbered advancing issues about 5 to 4 on the New York Stock Exchange. Volume was lighter.
The Russell 2000 index, which tracks smaller company stocks, finished Thursday down 4.02 points, or 0.7 percent, at 574.55.
Overseas, Japan’s Nikkei stock average finished 7.6 percent higher Thursday. In Europe, France’s CAC-40 lost 1.8 percent, Britain’s FTSE 100 declined 1.3 percent and Germany’s DAX index closed down 1.8 percent.
The Associated Press contributed to this report