Stocks Close Lower in Rocky Session

NEW YORK ( TheStreet) -- Stocks finished lower after riding a roller coaster during Thursday's session as investors digested promising jobless claims data, a mix of earnings results, a tripped circuit breaker by Cisco ( CSCO)and a Federal Reserve official's warning about deflation.

The Dow Jones Industrial Average lost 31 points, or 0.3%, to close at 10,467. The S&P 500 was shed 5 points, or 0.4%, to finish at 1102 and the Nasdaq fell 13 points, or 0.6%, lower at 2252.

St. Louis Federal Reserve Bank President James Bullard warned that current monetary policies are putting the U.S. at risk for a deflationary period similar to Japan's. Bullard suggested that the central bank consider quantitative easing measures to encourage inflation.

Investors were also on edge after Cisco triggered a circuit breaker at 10:41 a.m., which halted the stock. Cisco shares finished the session down by 0.8%.

Although a better-than-expected decline in initial weekly jobless claims lifted stocks earlier in the session, the morning's mix of corporate results also weighed on the market.

"Across the board, the market has probably seen as much of the gains that it's going to," said Daniel Penrod, senior industry analyst for the California Credit Union League. "There will be some blips that cause movements, but unless someone comes out with something earth-shattering, the feeling is that the rest of the year will be mostly flat -- a lot of the same old, same old.

"We're at a time right now where most of the bad news has worked its way through. The problem is that no one is confident enough to start the growth. Wall Street is back -- you can see it where the Dow sits and in the other indices -- but on Main Street, they're still concerned and not confident enough to bet their dollars that we're out of this yet. Until they're willing to do that, it's going to feel like we're coasting."

Overseas, Hong Kong's Hang Seng inched 0.01% higher, and Japan's Nikkei slipped 0.6%. The FTSE in London declined by 0.04%, and the DAX in Frankfurt lost 0.7%.

The Economy

Initial weekly jobless claims fell by 11,000 to 457,000 in the week ended July 24, which was better than analysts' expectations for claims of 464,000.

The Energy Information Administration said natural gas inventories increased by 28 billion cubic feet in the week ended July 23. The injection was lower than the additional supply build of between 31 billion and 35 billion cubic feet that analysts polled by Platts had been projecting.

Company News

Kraft Foods ( KFT), Procter & Gamble ( PG) and Hewlett-Packard ( HPQ) applied the most pressure on the Dow, while Merck ( MRK), DuPont ( DD) and Pfizer ( PFE) were showed the strongest performance.

In earnings news , Motorola ( MOT) surpassed second-quarter expectations and said it expects third-quarter profits of 10 cents to 12 cents a share, which is in line or 2 cents higher than what analysts had been expecting.

Shares of Exxon Mobil ( XOM) shed 0.9% after the oil company surpassed earnings expectations with an adjusted profit of $1.60 a share, but missed revenue estimates by $6 billion, with sales of $92.47 billion.

Shares of consumer products company Colgate Palmolive ( CL) lost 6.7% after the company narrowly beat second-quarter profit expectations with earnings of $1.17 a share. The company fell short of forecast sales of $3.94 billion with quarterly revenue of $3.81 billion.

Southwest ( LUV) topped profit expectations by 2 cents with earnings of 29 cents a share and said sales rose 21%, to $3.2 billion, meeting estimates. CEO Gary Kelly also said the airline is on track to hit a record load factor high in July.

Kellogg ( K) blamed a cereal recall and a tough business environment its second-quarter miss. The company also lowered its full-year earnings per share guidance to an expected growth range of 8% to 10%, down from a previous range of 11% to 13%.

Potash ( POT) beat top- and bottom-line estimates as the crop nutrient company said fertilizer applications are getting back to pre-recession levels. The company said pricing has been weak because customers are still hesitant to increase inventories. Potash guided for third-quarter earnings of 80 cents to $1.20 a share.

Spain's largest bank, Banco Santander ( STD), said net earnings declined by 8% as strong revenue growth in Latin America failed to offset the negative impact of the European recession.

France's largest drugmaker, Sanofi-Aventis ( SNY) is reportedly prepared to offer as much as $70 a share, or $18.7 billion, for Genzyme ( GENZ), according to Bloomberg.

Commodities and the Dollar

Following the EIA's report, the September natural gas contract added 11 cents, or 2.3%, to settle at $4.83 per million British thermal units. Meanwhile, crude oil for September delivery gained $1.37, or 1.8%, to settle at $78.36 a barrel.

Elsewhere in commodity markets, the August gold contract advanced $8, or 0.7%, to settle at $1,168.40 an ounce and the more actively December contract gained $8.80, or 0.8%, to settle at $1,171.20 an ounce.

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.7%.


The benchmark 10-year Treasury was up by 4/32, diluting the yield to 2.983%.

The two-year note was up by 2/32, lowering the yield to 0.590%. The 30-year bond was higher by 1/32, decreasing the yield to 4.072%.

--Written by Melinda Peer in New York.

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