Stocks Take Small Step Back

Updated from 4:18 p.m. EDT

Stocks in the U.S. finished slightly lower Thursday as buyers took a breather after the prior session's rally and failed to embrace news of a handout for embattled lender Countrywide Financial (CFC Quote - Cramer on CFC - Stock Picks).

After rising 40 points at the start of trading, the Dow Jones Industrial Average pulled back and ended down 0.25 point at 13,235.88. The S&P 500 eased 1.57 points, or 0.11%, at 1462.50. The Nasdaq Composite was moderately weaker, losing 11.10 points, or 0.43%, to 2541.70.

Peter Cardillo, chief market economist with Avalon Partners, said the market "is now beginning to digest and stabilize. In spite of the recent situation in the credit market, the economy remains sound. That may be making investors a bit hesitant, especially if the Federal Reserve doesn't lower interest rates at its next meeting in September."

Before the opening bell, Bank of America (BAC Quote - Cramer on BAC - Stock Picks) said it has invested $2 billion in Countrywide in order to help the largest mortgage lender in the U.S. weather the current difficulties in the credit market.

However, Countrywide's CEO Angelo Mozilo said in a televised interview that the credit environment is "not getting better" and that it is unclear when the housing cycle will bottom. He added that a steeper downturn could lead to a recession, and that the Fed should cut rates in order to inject liquidity into the market.

After soaring 20% in the premarket session, the stock finished with a small gain of 20 cents, or 0.9%, at $22.02. The shares have lost 22% this month.