Dow Closes Below 10,000

NEW YORK (TheStreet) -- Stocks stumbled Thursday with the Dow Jones Industrial Average closing below the 10,000 mark for the first time since July 6 as a weak read on regional manufacturing activity overshadowed better-than-expected employment data.

The Dow Jones Industrial Average lost 74 points, or 0.7% to finish at 9,986. The S&P 500 shed 8 points, or 0.8%, to 1,047, and the Nasdaq traded 23 points, or 1.1% lower, at 2,119.

Fears of a stalled recovery returned to the forefront after the Federal Reserve Bank of Kansas City said manufacturing activity in the region slowed significantly in August as the index fell to 0 from July's reading of 14. Aircraft and electronic equipment producers were the only plants not reporting a slowdown, according to the report, which also said that "shipments, new orders and employment indexes dropping into negative territory, and the order backlog index slipped from -2 to -16."

The news offset earlier optimism after the Labor Department reported a better-than-expected decline in the number of people filing for jobless benefits. Initial claims fell by 31,000, to 473,000 in the week ended Aug. 21 after the previous week's upwardly revised level of 504,000. Economists had expected claims to fall to 485,000, according to Briefing.com.

The market was also anticipating Friday's updated government figures on gross domestic product for the second quarter. Economists expect the government to revise its previous growth estimate to 1.4% from 2.4%, according to Bloomberg.

The market had also been in something of a holding pattern ahead of Federal Reserve Chairman Ben Bernanke's speech at the annual Federal Reserve symposium in Jackson Hole, Wyo. at 10 a.m. ET on Friday. Investors are eager to hear the chairman's outlook on the economy in light of recent disappointing economic data -- particularly in the housing market.

In other news, Joe Miller, a favorite of Sarah Palin and the Tea Party movement, appeared close to taking Alaska's Republican Senate primary, driving out Republican Sen. Lisa Murkowski.

Earlier, 3Par (PAR) announced that it reached a revised merger agreement with Dell(DELL) after Dell topped Hewlett-Packard's(HPQ) per-share bid by 30 cents with an offer of $24.30 a share.

But late in the day, HP responded by raising its offer to $27 a share. 3Par's stock was down 2.5% at $26.08 while Dell shares were off 0.3% to $11.75. Hewlett-Packard's stock traded 0.1% lower at $38.22.

Apple(AAPL) slid 1.1% to $240.28 ahead of an event Sept. 1 when it is expected to show off new models of the iPod. The market is also expecting it to hint at a renewed thrust for Apple TV.

Shares of Netflix (NFLX) rose 1.3% to $125.84 on news that it will bring streaming content to Apple devices with the launch of a free application for the iPhone and iPod.

Cisco(CSCO) announced plans to acquire content management specialist ExtendMedia to strengthen its position in video. The shares, which head lower by 2.4% at $20.70, were the Dow's biggest laggard.

Boeing(BA), Home Depot(HD) and McDonald's(MCD) were the only Dow components to finish in positive territory.

Ford(F) is moving further into Asia as it announced plans for eight new vehicles in India and a $350 million investment with partner Mazda in its Thailand pickup plant. The automaker said Asia will account for 70% of its global growth in the next decade. Shares fell 1.3% to $11.17.

Shares of JDS Uniphase (JDSU) were volatile, dropping 4.7% to close at $9.74. The company reported sales late Wednesday that came in below the $398.5 million that analysts had been expecting. The optical communications provider posted a profit of 15 cents on sales of $390.9 million. Wall Street had forecast a quarterly profit of 14 cents a share.

Guess(GES) plunged 10.7% to $34.13 after it missed analyst expectations for its full-year profit forecast. The denim retailer reported after the close Wednesday that profit rose 12% to $66.8 million, or 72 cents a share, ahead of analyst estimates of 68 cents.

France's second-largest bank, Credit Agricole, posted second-quarter income that was nearly 89% higher at €379 million ($481 million), surpassing analysts' estimates. Quarterly revenue rose 20% to €5.47 billion.

Strong performance in emerging markets drove Diageo's(DEO) growth, the maker of Johnnie Walker whiskey and Guinness stout said. The company narrowly missed estimates with full-year earnings that rose 1.5% to 1.63 billion pounds ($2.53 billion). Sales rose 2% to 9.78 billion pounds. The stock shed 1.6% to $65.31.

After the close of trading, retailer J. Crew(JCG) is expected to report quarterly earnings of 46 cents a share. The stock slipped 0.6% to $33.45. Enterprise software developers Micros Systems(MCRS) and Novell(NOVL) are projected to post profits of 41 cents a share and 7 cents a share, respectively, according to Briefing.com. Micros shares dropped 2.4% to $35.40 while Novell's stock fell down by 1.2% at $5.64.

The Energy Information Administration said that natural gas supplies rose by 40 billion cubic feet. Analysts polled by Platts were expecting storage levels to add between 37 billion and 41 billion cubic feet in the week ended Aug. 20.

October natural gas futures fell off by 5 cents to settle at $3.84 per million British thermal units. Crude oil for October delivery gained 84 cents to settle at $73.36 a barrel a day after the EIA reported a larger-than-expected increase of 4.1 million barrels to inventories in the week ended Aug. 20.

Elsewhere in commodity markets, the December gold contract went lower by $3.60, to settle at $1,237.70 an ounce.

In the afternoon, some $29 billion in 7-year Treasury notes brought in a yield at 1.989% and a better than average bid-to-cover ratio of 2.98, MarketWatch reported.

The benchmark 10-year Treasury note was up by 15/32, diluting the yield to 2.486%.

Meanwhile, the dollar weakened against a basket of currencies, with the dollar index down by 0.6%.

Overseas, Hong Kong's Hang Seng slipped 0.1%, while Japan's Nikkei gained 0.7%. The FTSE in London gained 0.9%, and the DAX in Frankfurt rose 0.2%.

--Written by Melinda Peer, Shanthi Venkataraman and Sung Moss in New York.

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