Stocks closed mixed as worries about a weakening economy and credit crunch continued to rattle the markets.
The credit fears persisted a day after the Fed announced plans to pump liquidity into the markets. Stocks initially rallied Wednesday on the news but ultimately gave up huge gains and settled just above level ground.
Thursday brought little in the way of optimism, as investors continued to watch bad news flow from the financial sector.
The market also closely watched economic reports this morningthat saw key indicators pointing toward inflation. Producer prices surged though retail sales jumped, the Labor Department said.
In a sign of skepticism about central bank efforts to combat the credit squeeze, Libor, a key interbank lending rate, showed only a slight decline on Thursday.
"People don't think the Fed has solved the problem. Their action yesterday hasn't reinstilled confidence in the market place and that's why all these financials are getting killed," said Stephen Massocca, co-chief executive at San Francisco-based investment bank Pacific Growth Equities.
Lehman Leads Banking Blues
Lehman said quarterly earnings fell, hurt by declining fixed-income revenues, and shares fell even though the investment banker's results easily beat estimates. Lehman later said it had gross writedowns of $3.5 billion in the fourth quarter, including $2.2 billion from mortgages.
Another company hurt by the subprime collapse, top tax preparer H&R Block , said it would take a $74.8 million charge for shutting down its Option One Mortgage subprime lender.
And Countrywide Financial shares fell after the troubled subprime lender said mortgage loan funding tumbled 40 percentto $23 billion in November. Countrywide is down 76 percent since the beginning of the year.
Moving the Market
Biogen Idec said after the market close Wednesday that it failed to receive any definitive takeover bids, sending shares plunging.
Sources told CNBC that potential suitors were concerned about past problems with Biogen's drug Tysabri, which the company has recently reintroduced.
Looking to earnings, the largest U.S. warehouse club operator, Costco, said net income rose to $262 million, or 59 cents per share, in its fiscal first quarter ending Nov. 25, from $237 million or 51 cents per share a year earlier, because of higher revenue from membership fees and rising gasoline prices. The rise was in line with market expectations.
Networking company Ciena reported strong earnings but a 2008 outlook that disappointed the market, sending shares sharply lower.
Rigel Pharma shares more than doubled in value after it said its experimental rheumatoid arthritis treatment was successful in a midstage trial. Conversely, shares of drug developer Neurocrine Biosciences lost more than half their value Thursday, plunging to an eight-year low, after the government asked the company for additional data on its insomnia treatment candidate indiplon.
-- Reuters contributed to this report.