NEW YORK – Stocks fell Thursday as continued concerns about interest rates, heightened geo-political worries and mixed economic data offset better-than-expected results from retailers Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT) .
The decline ended a five-day rally on the S&P and pushed the Dow back into negative territory for the year so far. Both the S&P 500 and Nasdaq are also down for the year.
The Dow Jones industrial average (search) ended down 80.62 points, or 0.74 percent, at 10,754.26. The Standard & Poor's 500 Index (search) was down 9.59 points, or 0.79 percent, at 1,200.75. The Nasdaq Composite Index (search) was down 26.09 points, or 1.25 percent, at 2,061.34.
Altria Group Inc. (MO) weighed on the Dow, falling 1.2 percent, or 79 cents to $64.72, after a government request that a federal court reconsider a ruling favorable to the tobacco industry.
Federal Reserve Chairman Alan Greenspan (search) repeated testimony to a U.S. House of Representatives committee that he delivered previously. Greenspan told a Senate panel Wednesday the economy continues to expand at a respectable pace, and that inflation, while not an immediate threat, remains something policy-makers must continue to guard against.
"Some of the weakness I think is linked to the fact that Greenspan is jawboning interest rates higher again," Jay Suskind, director of trading at Ryan, Beck & Co., said. "He's alluding to the fact that he's not going to stop raising rates."
The Fed chairman offered a modest endorsement of President Bush's idea of setting up private retirement accounts, but said that alone won't solve Social Security's long-term problems.
Meanwhile jobless claims were down for a third straight week, the Labor Department (search) reported, as the number of laid-off workers filing for unemployment benefits dropped to the lowest level in more than four years. The decline surprised economists, who had forecast an increase. The data served as fresh evidence of continuing improvements in the labor market.
In another report, the department said prices for imported goods rose by 0.9 percent in January as foreign petroleum prices jumped 4.6 percent and the price of non-petroleum imports edged up 0.2 percent. Import prices are expected to continue rising this year as the weaker dollar makes foreign products more expensive for Americans.
Separately, the Conference Board reported its Index of Leading Economic Indicators (search) slipped 0.3 percent last month after gaining 0.3 percent in December. The decline was blamed on a jump in energy prices, the weaker dollar and cautious business attitudes.
Oil prices declined 79 cents to settle at $47.54 at the New York Mercantile Exchange (search). The dollar softened against other major currencies, gold prices rose and Treasuries were mixed. The price of the 10-year note was down, while its yield rose to 4.18 percent, up from 4.16 percent late Wednesday.
"Higher oil prices might be contributing to a cautionary tone," Paul Cherney, chief market analyst at Standard & Poor's, said. "The one thing that this market has lacked since we came off the lows is we haven't seen a stampede of buyers."
Analysts attributed the day's trading to a lack of certainty about the strength of the economy, the pace of inflation and how much higher interest rates will go. The prospect of higher rates and questions about how much they will slow down the economy has made many investors wary of taking big bets, said John P. Waterman, chief investment officer at Rittenhouse Asset Management.
"There's always the risk that the Fed steps on the brakes too hard," Waterman said. "We're in kind of a delicate transition. We're trying to get from a recovery mode to a more sustainable mode. Once you get through that, and investors become convinced the economy is going to settle into a sustainable growth mode, then I think the market will start to do better. But we're in a digestion period right now."
Wal-Mart Stores Inc. (WMT) was up 10 cents at $52.70 after the world's largest retailer posted a 16.2 percent increase in profits for the fourth quarter, beating Wall Street expectations. Its earnings for the full year topped $10 billion for the first time. Wal-Mart president and chief executive Lee Scott called it a solid performance but added, "we can do better."
The nation's second-largest discount chain, Target Corp. (TGT), rose $1.09 to $50.16 after its fourth-quarter earnings edged up 0.1 percent over a year ago due to slightly improved margins and higher sales, which helped offset lease accounting adjustments. Target's profits results beat Wall Street forecasts by a penny.
Higher earnings from computer and printer maker Hewlett-Packard Co. (HPQ) failed to inspire gains in technology stocks. HP edged down 20 cents to $20.86 and its rivals' stocks also declined. International Business Machines Corp. (IBM) was off 87 cents at $93.75, while Dell Inc. (DELL) was down 26 cents at $40.34.
Medtronic Inc. (MDT) added 2.8 percent, or $1.46, to $53.26 after it reported a 17 percent rise on quarterly earnings. The medical device maker benefited from strong sales of implantable defibrillators and spinal products, and the weak dollar. Its earnings matched the average estimate of analysts polled by Thomson First Call.
RadioShack Corp. (RSH), the No. 3 U.S. electronics retailer, tumbled 10.3 percent, or $3.44 to $29.93 after it cut its outlook, citing rising costs.
Trading was active, with 1.58 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.95 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.
Decliners outnumbered advancers on the New York Stock Exchange and on Nasdaq by about 2-to-1.
The Russell 2000 index, which tracks smaller company stocks, was down 7.71, or 1.21 percent, at 631.14.
Overseas, Japan's Nikkei stock average shed 0.16 percent. In Europe, France's CAC-40 fell 0.09 percent, Britain's FTSE 100 rose 0.08 percent and Germany's DAX index was up 0.02 percent.
Reuters and the Associated Press contributed to this report.