Updated from 4:16 p.m. ESTStocks in the U.S. rallied out of the gate Thursday, but the major averages spent the bulk of the session in the red and closed lower following a much weaker-than-expected report on manufacturing activity in the mid-Atlantic region. The Dow Jones Industrial Average lost 142.96 points, or 1.2%, at 12,284.30, and the S&P 500 was down 17.50 points, or 1.3%, at 1342.53. The tech-heavy Nasdaq Composite fell 27.32 points, or 1.2%, to 2299.78. After a positive start, New York shares dropped significantly when the Federal Reserve Bank of Philadelphia said its monthly index sank to negative 24 from minus 20.9 in January. A number below 0 indicates a contraction in activity, and that was worse than economists' already poor average expectation of a negative 10 reading. Evidence has been building for months that the economy is in danger of entering a recession, in no small part due to the carnage in the credit markets, which has led the Fed to sharply lower borrowing costs. However, some data have remained upbeat, and policymakers have been reluctant to completely abandon the argument that too much easing could create inflationary pressures, especially in an environment of soaring commodity prices. "This data just reinforces the fact that the Fed is likely to cut interest rates again
In earnings, department-store operator J.C. Penney ( JCP) posted a 10% drop in fourth-quarter profits, but the decline wasn't as steep as Wall Street's forecast. The company said, though, that it is "cautious" on the coming year and offered guidance below analysts' expectations. Shares ended up 8 cents to $48.03. Elsewhere, bond insurers were again in focus after MBIA ( MBI) rebuked hedge fund manager Bill Ackman's plan to split up both that company and rival Ambac Financial ( ABK), claiming it only benefits Ackman's short positions on the companies. MBIA lost 2.3%, and Ambac slid 7.1%. In more financial-sector news, CNBC reported that broker Lehman Brothers ( LEH) is cutting 200 jobs. Lehman stock surrendered 2.3% to end the day. Similarly, coffee giant Starbucks ( SBUX) announced that it will fire around 600 employees amid a larger restructuring effort. The company, which recently reinstated founder Howard Schultz as CEO, has been
struggling amid heightened competition. Shares closed off 2.4% at $17.83. In M&A news, publisher Reed Elsevier ( ENL) will purchase data-services company ChoicePoint ( CPS) for $4.1 billion. ChoicePoint surged 43.4%. Back on the economic front, the Labor Department said jobless claims fell by 9,000 to 349,000, as expected. The leading economic indicators declined 0.1%, as anticipated. Treasury prices were on the rise. The 10-year note was up 1-4/32 in price to yield 3.75%. The 30-year bond was surging 1-7/32, yielding 4.53%. Foreign markets were uniformly higher following the upside previous session in the U.S. Hong Kong's Hang Seng tacked on 0.1%, and Japan's Nikkei 225 jumped 2.8%. In Europe, London's FTSE 100 and Germany's Xetra Dax retreated from more substantial intraday gains after the U.S. market took a turn for the worse, but they still closed higher. The bourses added 0.7% and 0.1%, respectively. In more overseas news, France-based bank Societe Generale said it lost $4.96 billion (3.35 billion euros) in the fourth quarter thanks to last month's trading-fraud scandal, in which a rogue trader executed a series of false transactions that cost the bank more than $7 billion.