Updated from 4:04 p.m. ESTWall Street stumbled Thursday amid a flood of economic data and a selloff in Apple ( AAPL) that weighed heavily on tech stocks. The Dow Jones Industrial Average fell 9.22 points, or 0.07%, to 12,567.93, and the S&P 500 gave back 4.25 points, or 0.3%, at 1426.37. The Nasdaq Composite slid 36.21 points, or 1.46%, at 2443.21. Intel ( INTC) was the biggest drag on the Dow industrials for a second day, down 1.9%, and the Philadelphia Semiconductor Sector Index, of which it's also a component, lost 3.9%. On the plus side, the S&P Retail Index rose 1.4%. Volume was again strong, with 2.89 billion shares changing hands on the New York Stock Exchange. Decliners beat advancers by a 5-to-3 margin. Volume on the Nasdaq reached nearly 2.50 billion shares, and losers outpaced winners 11 to 4. Stocks faltered early after the Labor Department's consumer price index for December showed stronger-than-expected inflation. The CPI was up 0.5%, compared with expectations for an increase of 0.4%. The so-called core index, which excludes food and energy prices, rose 0.2%, matching estimates. Core inflation, a closely monitored figure, is now up 2.6% over the past year. The data follow by a day the latest reading of the producer price index, which rose 0.9% last month, a greater-than-expected increase. The core PPI was up 0.2%, also ahead of forecasts. The PPI report measures inflation at the wholesale level.
The CPI is considered the more important of the two when it comes to influencing Federal Reserve decisions on interest rates, but both are factored in to the central bank's planning. Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission, said that there will likely be no change in Fed interest rate policy following the CPI number. In an emailed statement, he said that "more favorable news on core inflation will be needed for the Federal Reserve to lower its guard." Also on the economic docket, the Commerce Department said U.S. housing starts increased 4.5% in December to 1.64 million annualized units. Economists expected housing starts to decline slightly. Building permits were 5.5% higher for the month. Additionally, the Philadelphia Fed said its manufacturing index rose to a reading of 8.3 in January, compared to negative 2.3 in December. The government also said initial jobless claims unexpectedly fell by 8,000 to 290,000 for the week ended Jan. 12. Economists were predicting a rise to 315,000 claims. On top of all the data, Fed Chairman Ben Bernanke spoke on Capitol Hill. Though his prepared testimony featured no remarks on monetary policy, he did warn that budget deficits could prevent the U.S. from solving its economic problems.
Treasuries were holding steady, with the benchmark 10-year note up 7/32 in price to yield 4.75%. The dollar was rising against the euro and the yen. The U.S. market was coming off a session in which tech stocks were hit by a selloff in Intel. One of the biggest drags of the new day was Apple. After the previous close, the company posted blowout numbers for the most recent quarter but offered conservative guidance. Shares of the computer and iPod maker slid $5.88, or 6.2%, to $89.07, despite numerous upgrades. "The previous run-up in technology and forecasts were built into these stocks, and we saw some profit-taking," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "Stocks haven't had any major selloff or correction since August of last year. The beginning of a selloff would lead to a substantial correction, which is what's been keeping people on the sidelines." As for other earnings, Merrill Lynch ( MER) finished down 1.5% even after the broker reported fourth-quarter net income of $2.35 billion, or $2.41 a share, a surge of 68% from the same quarter a year earlier. Results handily beat the Thomson First Call consensus. Merrill also said it will raise its quarterly dividend 40% to 35 cents a share. The stock was lower by $1.41 to close at $95.40.
Bank of New York ( BK) reported fourth-quarter adjusted earnings that beat Wall Street's expectations by 3 cents. Revenue came in at $1.89 billion, also ahead of forecasts. Bank of New York gained 69 cents, or 1.7%, to $40.94. Meanwhile, Fifth Third Bancorp ( FITB) saw fourth-quarter earnings drop 80% from a year ago but still trumped the average estimate. Shares added 26 cents, or 0.7%, to $39.90. Harley-Davidson ( HOG), Knight Capital ( NITE) and Continental Airlines also topped analysts' expectations. Among those missing expectations was drug giant Novartis ( NVS), and its shares edged lower by $1.48, or 2.5%, to close at $58.05. On Friday, earnings releases are expected from General Electric ( GE), Motorola ( MOT), Schlumberger ( SLB) and Citigroup ( C). Away from stocks, oil prices resumed their slide following the Energy Department's weekly inventory report. The report showed that crude inventories unexpectedly rose by 6.8 million barrels last week. Distillate supplies were up 900,000 barrels, and gasoline stocks climbed by 3.5 million barrels. Crude, which halted its recent decline on Wednesday by surging above $52 a barrel, dropped $1.76 to close at $50.48. Most other commodities were lower. Precious metals lost ground in a choppy session. Gold fell $5.20 to $628.10 an ounce, and silver was off 16 cents to $12.72 an ounce. Overnight in Asia, Japan's Nikkei added 0.6% to 17,371, and Hong Kong's Hang Seng was higher by 1.1% to 20,277. In Europe, London's FTSE 100 was up 0.1% to 6210. Germany's Xetra DAX dipped by 0.2% to 6689.