Stocks sagged Thursday as a warning from Pfizer (PFE) hit the blue-chip Dow and nagging worries about slowing growth in corporate profits and the economy weighed offset another round of strong earnings 

The Dow Jones industrial average (search) dropped 45.64 points, or 0.45 percent, to 10,163.16. TheStandard & Poor's 500 Index (search) dropped 4.78 points, or 0.43 percent, to 1,106.69. The technology-laced Nasdaq Composite Index (search) slipped 2.17 points, or 0.11 percent, to 1,912.71, scraping out a fresh seven-week low.

Mobile phone giant Nokia  (NOK) dragged on the technology sector after it said earnings would fall further in 2004 as it cuts prices to hold on to market share. Drug maker Pfizer also fell and ranked as the Dow's biggest percentage loser after it cut its 2004 revenue forecast.

But a positive earnings report from Apple Computer and news of a drug approval for 3M Co. (MMM), along with strength in communications chip makers like PMC-Sierra Inc., helped limit the market's losses.

Wall Street got more upbeat news after the close when International Business Machines Corp. (IBM), the world's largest computer company, posted a higher quarterly profit that beat analysts' expectations.

The latest economic reports painted a mixed picture.

According to the Labor Department (search), the producer price index dropped 0.3 percent in June, a strong sign that inflation may not be as large an issue as some had feared. Economists expected a 0.2 percent rise in prices, but falling food and energy prices sent prices lower.

"The PPI was in line with expectations. So that was probably the best of the bunch this morning considering that jobless claims were up a little bit and the industrial production numbers were well below expectations." said John Caldwell, chief investment strategist at McDonald Financial Group.

Economic news drove much of the buying, backed up not only by the wholesale price drop, but also by strong sales and inventory reports. The Commerce Department (search) said inventories rose 0.4 percent in May, while sales climbed 0.7 percent, signs that businesses are increasing their investments and that consumers are rewarding their efforts.

The jobs picture, however, continues to be an area of concern. First-time jobless claims rose by 40,000 for the week to 349,000. The Labor Department blamed seasonal adjustments at the nation's automakers for the rise.

Investors are eagerly awaiting a government report on Friday on changes in consumer prices in June.

"There's always some element of anxiety, and, most recently, it has been weaker retail sales, the increase again in gas prices, and the disappointing news in tech, notably software," said David Sowerby, market strategist for Loomis Sayles. "That's what's been weighing heavily on the market."

In another report, the Federal Reserve (search) reported that output at U.S. factories, mines and utilities fell unexpectedly in June, recording its largest drop in more than a year. Wall Street had expected the June reading to be flat.

U.S. crude oil prices were down slightly, steadying after an explosive rally to six-week highs on Wednesday. The NYMEX August crude contract dipped 20 cents to settle at $40.77 a barrel.

The Organization of Petroleum Exporting Countries, which controls around half the world's oil exports, on Thursday confirmed it will enforce a planned increase of 500,000 barrels a day in formal supply quotas, effective Aug. 1, without holding a meeting next week.

After the closing bell, IBM climbed to $84.84 in volatile trading on the INET electronic brokerage system from $84.02 at its close on the New York Stock Exchange.

Global mobile handset leader Nokia (NOK) reported a drop in sales in handset and core earnings due to fierce competition and a weak product range. It warned that profitability would suffer for the rest of 2004. Nokia fell $1.79, or 12.6 percent, to $12.45.

Pfizer, which blamed its unexpectedly weak 2004 revenues on weaker-than-expected sales for some products and foreign- exchange fluctuations, lost $1.43, or 4.2 percent, to $32.58.

Apple Computer Inc. (AAPL) cushioned the Nasdaq's decline and kept the tech-driven index in positive territory for most of the day. Apple's stock jumped $3.35, or 11.3 percent, to $32.93. Apple posted quarterly net income on Wednesday that more than tripled.

3M gave a boost to the Dow after the Food and Drug Administration approved its Aldara drug as a treatment for a form of skin cancer. The stock rose 43 cents to $88.62.

In other earnings news, PepsiCo Inc. (PEP) fell $1.49 to $51.92 after meeting analysts' estimates but showing weakness in its Quaker brand products.

Despite a massive one-time charge to settle lawsuits over the WorldCom scandal, Citigroup (C) managed to beat Wall Street estimates for the second quarter by 5 cents per share. And Wachovia exceeded expectations by 2 cents per share on record quarterly earnings. Citigroup was down 89 cents at $44.21, while Wachovia (WB)slipped 32 cents to $44.37. 

Trading was active, with 1.4 billion shares changing hands on the New York Stock Exchange and about 1.7 billion shares traded on Nasdaq.

The Russell 2000 index of smaller companies was up 2.42, or 0.4 percent, at 562.16.

Overseas, Japan's Nikkei stock average rose 0.5 percent. In Europe, Britain's FTSE 100 closed down 0.7 percent, France's CAC-40 fell 1.1 percent for the session, and Germany's DAX index lost 1.3 percent.

Reuters and the Associated Press contributed to this report.