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Stocks Sink, Weighed Down by Economic Concerns (Update2)

Stocks in this article: ^DJI ^GSPC ^IXIC BUD STZ TTWO DOW WHR FIO FB QCOM VIAB RDS.A

(Updated from 1:28 p.m. ET with closing market prices.)

NEW YORK ( TheStreet) -- Major U.S. stock averages weakened Thursday as doubts about the strength of the U.S. economy weighed on investors' minds.

The Dow Jones Industrial Average fell 50 points, or 0.4%, to 13,861.

Breadth was positive, with winners outnumbering losers 20 to 10. The top blue-chip gainers were Hewlett-Packard (HPQ), Travelers (TRV), McDonald's (MCD) and AT&T (T).

The sharpest percentage decliners included Intel (INTC), UnitedHealth Group (UNH) and United Technologies (UTX).

The S&P 500 was down 4 points, or 0.3%, to 1,498. The Nasdaq lost 0.18 of a point to 3,142.

Most sectors in the broad market fell, with the consumer non-cyclical, capital goods and energy sectors posting the biggest losses. The services, financial and utilities sectors traded higher.

Volumes totaled 3.94 billion shares on the Big Board and 2.17 billion shares on the Nasdaq. Advancers edged decliners by a ratio of 1.1-to-1 on the New York Stock Exchange, and 1.6-to-1 ratio on the Nasdaq.

Greywolf chief technical analyst Mark Newton told TheStreet in an interview Wednesday evening that a report about the contraction of the economy was a "big eye opener" and "shock" to many people, noting that even as the Federal Reserve continues to pump $85 billion a month into the economy -- buying mortgage-backed securities and Treasuries -- "unemployment is still elevated and you're still seeing now signs of negative growth."

In the wake of the prior session's GDP number, Newton said he wasn't certain that Thursday's economic numbers were going to have any "big detail."

Newton also noted that traders have been concerned about increasing signs of momentum divergence; in the last couple of years, indices have been grinding higher and higher, but momentum continues to lag and volume has been weak.

He said the market is now at levels where the AAII and other sentiment polls are showing nearly a 30% spread between bulls and bears. Historically, those have been times when indices have made at least minor price corrections.

In U.S. economic news Thursday, the Chicago PMI registered an increase to 55.6 in January, its highest level since April 2012, from an upwardly revised 50 level. Economists were calling for a read of 50.5.

"The positive surprise for the month was due, in part, to a strong seasonal factor," said Bricklin Dwyer, an economist at BNP Paribas.

With the release of the Chicago PMI data, all the latest regional manufacturing surveys are now available ahead the national ISM manufacturing index due Friday. Dwyer said four of the six regional surveys that BNP Paribas economists follow fell for the month, suggesting the national ISM index could drop by a modest 0.5 point to 49.7 in January, in line with their current expectations.

A spate of jobs numbers were released Thursday morning before the open ahead of Friday's highly anticipated January nonfarm payrolls report.

Challenger Gray & Christmas said Thursday that U.S. employers announced plans to cut payrolls by 40,430 in January, up 24% from December.

The Labor Department said initial jobless claims for the week ended Jan. 26 increased by 38,000 to 368,000 from the previous week's unrevised figure of 330,000. The four-week moving average was 352,000, little changed from the previous week's unrevised average.

Continuing claims for the week ended Jan. 19 rose by 22,000 to 3.197 million from the preceding week's upwardly revised level of 3.175 million.

Economists were expecting initial jobless claims of 350,000 and continuing claims of 3.176 million.

The Bureau of Economic Analysis said personal income jumped 2.6% in December after rising by an upwardly revised 1% in November, as dividend income increased by 34.3% from the month prior. Personal spending ticked up 0.2% after increasing 0.4%. Expectations were for a rise in personal income of 0.8% and spending of 0.3%.

"The spectacular ... leap in U.S. personal income in December won't be sustained as it was due to dividend and bonus payments being brought forward in anticipation of year-end rises in tax rates," said Paul Dales, senior U.S. economist at Capital Economics.

The Bureau of Labor Statistics said its employment cost index rose by an expected 0.5% in the fourth quarter after increasing 0.4% the prior quarter.

Gold for April delivery plunged $19.60 to settle at $1,662 an ounce at the Comex division of the New York Mercantile Exchange, while March crude oil futures closed off 45 cents at $97.49 a barrel.

The benchmark 10-year Treasury rose 1/32 with the yield at 1.987%. The dollar was down 0.08%, according to the U.S. dollar index.

In corporate news, Dow Chemical (DOW) shares tumbled 7% after the company fell short of fourth-quarter earnings estimates by a penny. The company said during the second half of 2012 it saw a "significant deterioration" in the markets that Dow Chemical serves, particularly China.

Facebook's (FB) fourth-quarter earnings topped Wall Street expectations as revenue jumped 40%. Mobile revenue came in shy of many analysts' lofty estimates. Shares slipped 0.8%.

Fusion-IO (FIO) shares plummeted 13% after the provider of data-center services gave much-lower-than-expected sales estimates for the third quarter at $80 million and an operating loss estimate of $10 million to $15 million as Facebook and Apple (AAPL) pushed back bulk orders.

Qualcomm (QCOM), the chipmaker, blew past Wall Street's fiscal first-quarter estimates and offered robust second-quarter guidance. Shares popped 3.9%.

Media giant Viacom (VIAB) posted fiscal first-quarter earnings of 91 cents a share, beating estimates by a penny. Revenue decreased 16% to $3.31 billion, driven primarily by lower Filmed Entertainment revenue due to the timing and mix of releases. The Wall Street revenue target was $3.49 billion. Shares rose 1.7%.

Royal Dutch Shell (RDS.A), Europe's largest oil company, said fourth-quarter net earnings rose 2.6% to $6.67 billion, coming in below analysts' expectations. Shares lost 3%.

Shell said it would raise its dividend in 2013 to 45 cents a share, a 4.7% boost from the year earlier.

Whirlpool (WHR) shares closed up 6.1% after the appliance maker beat fourth-quarter earnings expectations with the support of cost-reduction programs and loftier product prices.

Take-Two Interactive Software (TTWO) shares tumbled 6.8% after Rockstar Games, a publishing label of the interactive entertainment developer, announced that the worldwide launch of Grand Theft Auto V will be delayed until Sept. 17. The September release date moves the launch back from its original projected release window of spring 2013 in order to allow additional development time.

Shares of wine company Constellation Brands (STZ) plummeted 17% and had been briefly halted in the morning as the Department of Justice filed a civil antitrust lawsuit challenging Anheuser-Busch InBev's (BUD) proposed acquisition of total ownership and control of Grupo Modelo, explaining that the $20.1 billion transaction would be anti-competitive for the beer market.

Anheuser-Busch InBev American depositary receipts slumped by 5.9%.

-- Written by Andrea Tse and Joe Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.

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