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Dow Pares Gains After Philly Fed Report

Cindy Perman|CNBC.com
Thursday, 21 Feb 2008 | 11:47 AM ET

U.S. stocks turned lower after a weaker-than-expected Philadelphia Federal Reserve report zapped gains inspired by good news for RIM and Cisco in the tech sector.

The Dow Jones Industrial Average and Standard & Poor's 500 index were slightly lower after the report. The tech-heavy Nasdaq attempted to hold on to modest gains.

The Philadelphia Fed reported that its gauge of regional factory activity fell to minus 24 in February from an already weak minus 20.9, which had been its worst reading since the 2001 recession. Economists had expected a slight bump up in the gauge to minus 11.

In other economic news, the Conference Board reported that leading indicators slipped 0.1 percent in January, the fourth straight monthly decline. Stock prices were the largest negative contributor, the group said. Meanwhile, weekly jobless claims fell by 9,000 but the four-week moving average jumped to 360,500, its highest level since October 2005.

Crude supplies rose by 4.2 million barrels, almost twice as much as expected, the Energy Information Administration said in its weekly report.

Oil climbed back up over $99 a barrel, after spending most of the morning in the $98 range, and crossing $101 a barrel in intraday trading Wednesday.

Oil investor T. Boone Pickens told CNBC Thursday that he expects prices of oil and natural gas to fall in the near-term and has a short position on both commodities. Pickens anticipates oil will fall by about $10 to $15 a barrel in the second quarter, but said it will likely be back above $100 a barrel in the second half of the year.

It was a good day for techs, as more good news trickled in, building on the sector's momentum from H-P's better-than-expected results.

American depositary shares of Research In Motion jumped after the Canadian company raised its fourth-quarter subscriber outlook, citing strong demand for its BlackBerry smart phones over the holidays. The company also backed its revenue and earnings outlook, which calls for revenue of $1.80 billion to $1.87 billion and earnings per share between 66 cents and 70 cents.

Meanwhile, Citigroup upgraded its rating on networking-gear maker Cisco to "buy" from "hold."

Microsoft pulled back to modest gains after the software giant announced that it would increase transparency and information sharing by making key elements of some of its best-selling software products widely available. Microsoft will publish on its site key software blueprints, known as application program interfaces, Reuters reported. Microsoft also pledged not to sue open-source developers for development or noncommercial distribution of these blueprints.

Microsoft CEO Steve Ballmer will hold a conference call on the changes at 11:30 a.m. ET. (Listen to the conference call.)

J.C. Penneyreported a smaller-than-expected drop in quarterly profit as the department-store operator offset weak sales with tighter controls on costs. Penney said its net fell 10 percent to $430 million, or $1.93 a share, for its fiscal fourth quarter ended Feb. 2, from $477 million, or $2.09 per share, a year earlier. Earlier this month, Penney said it expected to report earnings between $1.65 a share to $1.80 a share.

Retailers were mostly higher but discount retailer Target remained lower after Citigroup cut its rating on the stock to "sell" from "hold."

Speculation is swirling that Delta and Northwest could announce their merger as early as today. Such a tie-up would create the largest U.S. airline by traffic.

Send comments to Cindy Perman at cindy.perman@nbcuni.com.

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