Dow Claws Back to Close With Scant Loss

NEW YORK (TheStreet) -- Stocks clawed back to the flatline late in the session to finish with nominal losses on Thursday, shrugging off an unexpected rise in initial jobless claims and a rout in the financial sector that sent the Dow Jones Industrial Average as much as 70 points lower earlier in the day.

The Dow finished down a little more than 1 point at 11,094. The S&P 500 gave back 4 points, or 0.4%, to 1,173 and the Nasdaq Composite fell 6 points, or 0.2%, at 2,435.

Shares of McDonalds(MCD), Kraft(KFT) and Verizon(VZ) were outperformers within the Dow.

Probes into foreclosure procedures weighed on financials, especially the four money-center banks, with shares of Bank of America(BAC) and JPMorgan Chase(JPM) putting in among the worst performances on the Dow, falling 5.2% and 3% respectively. Wells Fargo(WFC) and Citigroup(C) suffered steep losses as well, shedding over 4% each.

On Wednesday, attorneys general across 50 states ordered a probe into the foreclosure practices of the largest banks. JPMorgan has suspended foreclosures in several states while Bank of America has frozen all foreclosures. Faulty practices might result in legal fines for the banks. More importantly, a moratorium on foreclosures might mean banks will have to keep nonperforming assets on their books longer.

The SPDR Financial Select Sector ETF(XLF) was down 1.8%.

Stocks opened the day weak. Investors had a string of economic releases to chew on Thursday morning.Initial weekly jobless claims gained 13,000, hitting a higher-than-expected level of 462,000 in the week ended Oct. 9. Economists had expected first-time claims to climb to 450,000, according to Briefing.com.

Producer prices strengthened 0.4% in September after similar growth in August, exceeding the growth of 0.2% that economists had been expecting, according to Briefing.com. Excluding volatile food and energy costs, the core rate increased 0.1% as expected, after similar growth in August.

Meanwhile, the Department of Commerce said the trade gap widened to $46.35 billion in August from a previous deficit of $42.6 billion. Wall Street had been projecting a deficit of $44.5 billion, according to Briefing.com.

Daniel Penrod, senior industry analyst at the California Credit Union League, said the recent economic data isn't presenting a single direction where everything appears to be heading, creating uncertainty for investors.

"There's concern now that the Fed may be contemplating pushing inflation up to spur movement from consumers to prevent becoming another Japan where we're sitting at a 0% interest rate with little to no economic growth. That reference appears to be a death knell," Penrod said.

"We've done research on the new consumer coming out of this market and what's interesting is that there are many different types of consumers. There are pockets struggling with debt and the ability to make purchases, but there's also a group that has equity and a steady income but is experiencing a crisis of confidence," Penrod said.

"So while Wall Street has a single profile and moves homogenously on economic data, Main Street is bringing multiple profiles to the table so there isn't one action -- whether from the Fed or jobs data -- that will move consumers in the same direction," he added. "The challenge is getting the right group to move in order to push economic growth through the consumer."