NEW YORK ( TheStreet) - Stocks pulled back Thursday after a higher-than-expected rise in jobless claims slowed early earnings season momentum.

The Dow Jones Industrial Average was down by 23 points, or 0.2%, to finish at 11,732 for its first drop in three days. The S&P 500 was off by 2 points or 0.2%, to close at 1284, and the Nasdaq Composite fell 2 points, or 0.07%, to settle at 2,735.

DuPont ( DD), Home Depot ( HD), and Caterpillar ( CAT) were among the biggest percentage gainers in the Dow.

Intel ( INTC) said after the bell Thursday that adjusted profits rose to 59 cents per share, up from 55 cents a year earlier. Analysts were expecting an EPS of53 cents. The tech bellwether also issued a positive outlook for 2011. Shares were modestly higher in aftermarket trades.

Merck ( MRK) was the worst performer among the blue chips, dragging other healthcare stocks lower. Shares shed more than 6% after the company announced changes to clinical studies of vorapaxar, one of its investigational cardiovascular medicines. Merck said it would end one study of the drug and the drug's use would be reduced in a separate study.

Alcoa ( AA) was also weak, sliding more than 3%. Sixteen of the Dow's 30 components finished lower.

Volume on the New York Stock Exchange was around 934 million, while the Nasdaq saw 1.94 billion shares changing hands. Breadth was negative on both exchanges with losers outpacing winners 1623 to 1361 on the Big Board and 1448 to 1136 on the Nasdaq.

The Labor Department said initial weekly jobless claims rose by a higher-than-expected 35,000 to 445,000 in the week ended Jan. 8, from 410,000, previously.

John Canally, economist at LPL Financial, said the initial claims data often tends to be wonky during the first weeks of the year, as holidays tend to disrupt data collection, one reason why the market was not too alarmed at the report.

"There is a chance it job market could have deteriorated in the last week, but it's hard to get a clean read at this time of the year. I would have been just as skeptical if the claims had fallen to 350,000," said Canally."Overall the trend is down. Household employment data shows there is not a lot of firing but not more hiring."

Inflation was also in focus after South Korea raised key interest rates to help curb rising prices in that country. The Bank of England held rates at 0.5% .

The European Central Bank also kept rates unchanged, at 1%, though ECB President Jean-Claude Trichet noted some short-term inflation pressure, mostly from energy prices, during a press conference following the rate decision. Trichet said price stability was expected over the medium term but that close monitoring was needed.

Quincy Krosby, a market strategist with Prudential Financial, said initial unemployment claims and the verbal hint of tightening accommodative policies in Europe caused stocks to waver on Thursday, but said earnings could push the market higher next week.

"The main issue for the market is financials and whether there will be a round of dividend hikes," said Krosby, pointing to regulatory issues now facing banks .

JPMorgan Chase ( JPM), one of the banks that's expected to look to boost its dividend , is scheduled to report its fourth-quarter results before Friday's opening bell.

"We'll also be looking at input costs to see how they affect margins and whether they can be passed on to the consumer," she said, adding, "Given that consumer spending accounts for 70% of U.S. GDP, at what point can the consumer fully participate in the economy again?"

In other economic news, the Labor Department said producer prices rose 1.1% in December after gaining 0.8% in November. Wall Street had been projecting an increase of 0.8%, according to Excluding volatile food and energy prices, the core rate rose 0.2%, as expected, after growth of 0.3% in November.

The Commerce Department said the trade deficit narrowed to $38.3 billion in November, from $38.7 billion, previously. Economists had expected the deficit to widen to $41 billion.

TTM Technologies ( TTMI) saw its stock jump 21% to $17.74 after the printed circuit boards company said it expects fourth-quarter adjusted earnings of 45 cents a share, which topped Wall Street's estimates.

Shares of Micron Technology ( MU) closed up 3.1% to $9.63 after the company received a pair of upgrades from Robert W. Baird and Sterne Agee. Both firms cited expectations of price stabilization for the company's DRAM dynamic random access memory products.

Marathon Oil ( MRO) said it's moving forward with plans to spin off its refining and sales business, creating two independent energy companies . Shares rose 6% to $42.98.

Shares of Whole Foods Markets ( WFMI) jumped 6% to $52.31 after Jefferies raised its 12-month price target on the stock to $60 from $47 on signs that shoppers were "trading up".

Deere ( DE) saw its shares rise 2.3% to $89.47 after Wells Fargo lifted its target price on the stock to a range of $103 to $105 per share from $90 to $93 previously.

In commodity markets, the February crude oil contract was trading 46 cents lower at $91.40 a barrel. The February gold contract rose $1.2 to trade at $1,387 an ounce.

The dollar weakened against a basket of currencies with the dollar index down by 1.1%. The benchmark 10-year Treasury rose 6/32, diluting the yield to 3.3352%.


Hong Kong's Hang Seng added 0.5% and Japan's Nikkei gained 0.7%. London's FTSE lost 0.4% while the DAX in Frankfurt rose by 0.09%.

--Written by Melinda Peer and Shanthi Bharatwaj in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.