A drop in energy stocks dragged the market lower Thursday following a government report that consumers and businesses cut back on their use of oil and gas.
A jump in petroleum supplies last week stirred worries that the falling demand for energy was a sign of more weakness in the economy. The report pushed crude oil down about 3 percent, below $77 a barrel.
The resulting slide in energy shares upended an early advance led by technology stocks, which rose after 3Com Corp. agreed to a $2.7 billion takeover by Hewlett-Packard Co. and as Intel Corp. said it would pay $1.25 billion to Advanced Micro Devices Inc. to settle legal disputes.
The disappointing report on energy usage overshadowed other news about the economy. The Labor Department said new claims for unemployment insurance fell last week to a seasonally adjusted 502,000 from an upwardly revised 514,000 the previous week. That's the fewest claims since early January and fewer than economists had forecast.
Wal-Mart Stores Inc. reported third-quarter earnings that beat analysts' expectations, though sales at stores open at least a year dropped during the quarter. The nation's biggest retailer said sales at existing stores would range from a drop of 1 percent to a gain of 1 percent in its fourth quarter. Sales at stores open at least a year are an important indicator of a retailer's strength.
The mammoth company is seen as a key indicator of consumer spending trends. Investors have worried for months that consumers are so strained by unemployment and lower home prices that they won't spend more and help propel a recovery in the economy.
Frank Ingarra Jr., co-portfolio manager at Hennessy Funds in Stamford, Conn., said stocks had been due for a pause after steep gains in the past week. The Dow Jones industrial average and the Standard & Poor's 500 index rose to 13-month highs Wednesday.
"There is very light volume so it looks like the market wants to do a little consolidating here," he said.
In midafternoon trading, the Dow fell 60.84, or 0.6 percent, to 10,230.42. The Dow rose 519 points, or 5.3 percent, in the past six days, the longest stretch of gains since an eight-day advance in late August.
The broader S&P 500 index fell 7.33, or 0.7 percent, to 1,091.18, and the Nasdaq fell 10.02, or 0.5 percent, to 2,156.88.
Three stocks fell for every one that rose on the
New York Stock Exchange, where volume came to 604.9 million shares compared with 661.3 million shares traded at same point Wednesday.
Tom Nyheim, portfolio manager at Christiana Bank & Trust Co. in Greenville, Del., said the drop in oil wasn't likely to last because demand would outstrip supply as economies in Asia and elsewhere recover ahead of the U.S.
He was encouraged that the stock market held most of its recent gains and wasn't enduring big slides when downbeat news arrived.
"When you get a bad piece of information coming into the market it only takes it down a half percent and then the market seems to firm up," Nyheim said. "I think we're going to consolidate, maybe flat-line toward the end of the year."
Treasurys were mixed after light demand at government auction of 30-year notes. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.47 percent from 3.48 percent late Tuesday. Bond markets were closed Wednesday for Veterans Day.
Crude oil fell $2.25 to $77.03 per barrel on the New York Mercantile Exchange. Gold fell.
The drop in oil weighed on energy stocks. Anadarko Petroleum Corp. fell $2.32, or 3.6 percent, to $62.66, while Range Resources Corp. fell $2.10, or 4.1 percent, to $49.10.
Among tech stocks, 3Com rose $1.79, or 31.5 percent, to $7.48, while H-P fell 30 cents, or 0.6 percent, to $49.71.
Advanced Micro rose $1.21, or 22.7 percent, to $6.53, while Intel slipped 2 cents, or 0.1 percent, to $19.82.
Wal-Mart rose 34 cents, or 0.6 percent, to $53.31. Kohl's Corp. rose 26 cents, or 0.5 percent, to $54.85 after the department store chain's fiscal third-quarter profit rose 21 percent.
The Russell 2000 index of smaller companies fell 7.20, or 1.2 percent, to 585.51.
Overseas, Britain's FTSE 100 rose 0.2 percent, Germany's DAX index fell 0.1 percent and France's CAC-40 fell 0.2 percent. Japan's benchmark Nikkei stock average lost 0.7 percent.
