U.S. stocks wavered Thursday as reports on January retail sales and jobless claims stirred recessionary fears. Tech stocks were under pressure after Cisco said consumers have grown increasingly cautious.
The Nasdaq moved in and out of the red after the tech gauge on Wednesday became the first major U.S. index to slide into bear-market territory. The Nasdaq closed at 2278.75, more than 20% below its Oct. 31 high. The Dow Jones Industrial Average and S&P 500 index were equally as indecisive in morning trading.
European stocks extended their earlier losses Thursday after the European Central Bank held interest rates at 4.0 percent and the Bank of England cut by another quarter point to 5.25 percent. Japan closed higher, while Australia declined. Most Asian markets are closed for the Lunar New Year Holiday.
Shares of Cisco were down about 3 percent, after a 7 percent slide in after-hours trading. After the closing bell Wednesday, the the networking-gear maker reported earnings in-line with estimates, but CEO John Chambers said in a conference call that, "It's the most cautious I've seen CEOs in the U.S. and Europe in many years," adding that, "We do think there is a very cautious attitude in the boardroom and that is different from six months ago."
Chambers's remarks echoed those he made in November about a dramatic drop in demand from banks. The stock has fallen about 28 percent since that time. On CNBC Thursday, however, the Cisco chief was more optimistic about business. The most pessimistic thing he said was simply that we're "in for some bumps."
Tech stocks Hewlett-Packard and IBM were among the biggest drags on the Dow.
Retailers reported weak January sales. Wal-Mart reported a lower-than-expected 0.5 percent increase in same-store sales. Such sales dropped 1.1% at rival Target . Gap sales fell 2%.
"The fact that the weakness in traffic got weaker in January than it was in December, you're going to have a first quarter that's probably more challenging than people expected," Dana Telsey, chief research officer at Telsey Advisory Group, in an interview on CNBC's "Squawk Box."
Reflecting the tentative nature of consumers amid all this recession talk, Costco , which sells wholesale food and other staples, saw same-store sales jump 7%.
Home Depot was the biggest advancer on the Dow. The home-improvement chain recently sold 11 landscape-supply stores to a Florida developer fo $22 million. Last week, Home Depot said it was cutting 500 jobs at its Atlanta headquarters amid the housing slowdown.
Pending-home sales slipped 1.5 percent in December, a more-severe drop than the 1 percent economists had expected.
U.S. jobless claims fell by 22,000, lower than expected, last week, but the number of workers remaining on unemployment assistance rose to its highest level in more than two years, the Labor Department reported. The four week moving average rose to 335,000, below the key 350,000 mark. Anything above 350,000 is widely considered to be recessionary.
Given all the economic softness, the market widely expects the Federal Reserve to cut interest rates again when it next meets on March 18. The target for the federal-funds rate is currently at 3%.
"The market is a little like a spoiled kid," Bernie McSherry, a floor broker for Cuttone & Co. told CNBC. "They've gotten some candy and they want more of it -- they're demanding more of it -- from the Fed."
In politics, a stimulus package meant to help the economy rebound is facing delays as Senate Republicans blocked a bid by Democrats to add $44 billion in help for the elderly, disabled veterans, the unemployed and businesses to the House-passed economic aid package.
Standard & Poor's announced an overhaul packagefor the way it rates risk, hoping to fend off some of the criticism that ratings agencies were in part responsible for the subprime-loan debacle.