NEW YORK – Stocks ended mixed Thursday as a spike in oil prices following a mediocre inventory report offset an upbeat forecast from top cell phone maker Nokia (NOK) and a sharp drop in initial unemployment claims. Technology shares benefited from a pair of outlook upgrades and strong earnings from National Semiconductor Corp. (NSM).
The Dow Jones industrial average (search) closed down 24.26 points, or 0.24 percent, at 10,289.10. The Standard & Poor's 500 Index (search) rose 2.11 points, or 0.19 percent, to 1,118.38. The technology-laced Nasdaq Composite Index (search) ended up 19.01 points, or 1.03 percent, at 1,869.65.
Investors grew more cautious through the session as oil prices climbed, topping the $44 per barrel mark after weeks of declines. Higher oil prices, which have roiled markets all summer, usually spell bad news for stock prices, as investors worry about the impact of higher costs on companies' profit margins.
October crude on the New York Mercantile Exchange (search) settled $1.84, or 4.3 percent, higher at $44.61 per barrel after a government report showing U.S. crude stocks fell more than expected last week.
Finland's Nokia , the world's No. 1 mobile phone maker, raised its third-quarter sales and earnings outlooks due to strong demand, giving a boost to S&P component Texas Instruments Inc. (TXN) , the world's largest maker of chips for cell phones. Texas Instruments, which counts Nokia as its largest customer, Wednesday trimmed its third-quarter revenue outlook but said it would meet its profit forecast.
"Texas Instruments has probably had the biggest effect -- with the outlook there not as bad as people expected it to be," said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank Private Wealth Management.
"That's helping a tech rally with people rotating into the sector," he added.
Meanwhile, analog chipmaker National Semiconductor helped spur tech gains when it posted a higher quarterly profit on Thursday.
Investors welcomed the latest Labor Department (search) report, which showed 319,000 new claims for the past week, down 44,000 from a week ago. It was the lowest level of first-time claims since July.
Wall Street was also disappointed by the Commerce Department's (search) report on wholesale inventories, which rose 1.3 percent in July, double what economists had expected. Wholesale sales rose by only 0.5 percent — which means that business and consumer spending has trailed off and more products are sitting in warehouses.
"We're starting to see some real evidence of softness in consumer spending," said Russ Koesterich, U.S. equity strategist for State Street Corp. in Boston. "I don't think the economy is falling off a cliff. It's chugging along at a moderate pace, but will it be enough to keep corporate profits where they need to be? That's the question."
The economic data will likely weigh heavily on the Federal Reserve (search) as it prepares to meet Sept. 21 to discuss another hike in the nation's benchmark interest rate, which currently stands at 1.5 percent. The improved jobs picture and rising import prices increase the chances that the Fed will raise rates by a quarter percentage point, even though raising rates in the midst of an election can sometimes weigh on the presidential incumbent.
While Fed Chairman Alan Greenspan (search) was optimistic about the economy's strength in his congressional testimony Wednesday, Wall Street took a more cautious view, waiting to see how the summer's economic slowdown will affect third- and fourth-quarter earnings.
"The takeaway we're getting from the Fed is that the economy's growing, but it's uneven," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. "Add to that the lack of direction in the market, and the next catalyst for the market won't be the Fed meeting or interest rates. It'll be company earnings, and whether there's been enough top-line movement to have an impact on the bottom line."
Nokia jumped $1.06 to $13.77 after the Finnish maker of cellular phones raised its sales and profit outlooks for the current quarter. The company cited stronger demand for multi-function mobile devices.
Texas Instruments Inc. (TXN) surged 10 percent on news it expected third-quarter earnings to come in above the middle of its previous estimate range. Investors shrugged off the chip maker's warning that sales could fall below its past outlook due to low demand.
During the session, National Semiconductor Corp. reported a 29 percent jump in sales, beating Wall Street estimates by 5 cents per share, but added that profits for the current quarter would likely fall 8 to 10 percent in comparison. Still, its stock closed 52 cents, or 4.4 percent, higher at $12.52.
Industrial stocks under pressure included Boeing Co. (BA) down 79 cents at $53.26 and General Motors Corp. (GM), 39 cents lower at $42.82. Both are Dow components. Pharmaceuticals were also under the gun, with Pfizer Inc 33 cents lower at $32.44.
"We're seeing a rotation into the more economically sensitive sectors," said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank Private Wealth Management.
"We had Greenspan's comments yesterday and I think investors are hoping for a re-acceleration not only in economic growth but hopefully also in expectations in earnings."
Supermarket chain Pathmark Stores Inc.(PTMK) tumbled $1.32, or 18 percent, to $5.85 after it said it lost five cents per share in the second quarter and would likely default on some of the terms of its credit agreement in the current quarter. The company also reduced its full-year earnings guidance.
Investors also sold shares of Procter & Gamble Co.(PG), despite the consumer products maker's confirmation that its earnings would meet analysts' target and profits would grow at least 10 percent for the current quarter. P&G shares slipped 64 cents to $56.09.
Trading was active, with 1.37 billion shares changing hands on the New York Stock Exchange, just below the 1.4 billion daily average for last year. About 1.66 billion shares were traded on Nasdaq, just below the 1.69 billion daily average last year.
Advancers outnumbered decliners on the NYSE by about 5-to-3, and Nasdaq by about 2-to-1.
The Russell 2000 index of smaller companies finished up 8.39, or 1.5 percent, at 566.18.
Overseas, Japan's Nikkei stock average dropped 1 percent. In Europe, Britain's FTSE 100 closed down 0.5 percent, France's CAC-40 lost 0.7 percent for the session and Germany's DAX index fell 0.9 percent.
Officials at the Nasdaq Stock Market and the American Stock Exchange will halt to trading from 11 a.m. to 11:01 a.m. on Friday to observe a minute of silence in memory of the victims of the Sept. 11 attacks. The Nasdaq will also place commemorative displays on its Marketsite building in Times Square on Friday and Saturday.
Reuters and the Associated Press contributed to this report.