Stocks wavered Thursday after a dismal manufacturing reading and a slew of analyst downgrades.
The Dow Jones Industrial Average briefly fell below 12000 after the Philadelphia Federal Reserve reported regional manufacturing activity slowed more than expected in June.
Economic indicators -- especially those from June -- are being watched extra closely ahead of the Federal Reserve's policy-setting meeting next week.
"The big thing we're concerned about right now is they want the numbers that are good enough so you don't fall into a recession, but at the same time, you want the numbers to be weak enough so it's unlikely to have the Fed raising [rates]," Doug Roberts, chief investment strategist at Channel Capital Research, told Reuters.
AIG, helped alleviate pressure on the Dow after Citigroup raised its rating on the stock to "buy" from "hold," saying the insurer is undervalued -- even if its earnings don't grow -- and the stock is poised for a 35 percent jump in the next 12 months.
Initial jobless claims fell by 5,000 last week. However, the four-week moving average, which smooths out weekly fluctuations, ticked higher for a second straight week.
"Jobless claims have been trending upward, albeit very slowly, but they remain low enough to suggest the contraction in the economy has thus far been shallow," Tony Crescenzi, of Miller Tabak, wrote in a guest-blog post.
Leading indicators rose for a second straight month, climbing 0.1 percent in May, the Conference Board reported.
U.S. light, sweet crude oil slipped about $3, trading between $133 and $134 a barrel. Shares of energy stocks, including Dow components ExxonMobil and Chevron, declined.
Treasury Secretary Henry Paulson is speaking later today and is expected to urge that, in the wake of the Bear Stearns' collapse, the Fed be given new powers to regulate Wall Street, the Wall Street Journal and the Washington Post reported.
Meanwhile, two former Bear Stearns hedge-fund managers were arrested on charges of securities fraud and are expected to be indicted for their role in the collapse of two hedge funds that helped kick off the credit crisis last year.
Financials came under pressure once again after a couple of analyst downgrades.
Morgan Stanley was off more than 1 percent after Oppenheimer analyst Meredith Whitney cut her earnings forecast for 2008 and 2009.
Adding to Morgan's woes, the firm is expected to take a $120 million revenue hit after a suspected rogue trader incorrectly valued his positions in the credit-derivatives market, the Financial Times reported on Thursday.
UBS fell 4 percent after a downgrade from Credit Suisse.
Fifth Third Bancorp ticked higher. Ladenburg Thalmann analyst Richard Bove cut his 2008 earnings outlook for Fifth Third, a day after the Midwest bank announced plans to slash its dividend by two-thirds and raise additional capital.
It wasn't just financials that were slapped with downgrades:
Chemical products manufacturer Huntsman saw its shares tumble 40 percent at the open after the company was downgraded by Jefferies to "underperform" from "hold" and had its price target lowered from $28 to $15.
Kraft Foods shares fell after a downgrade from UBS.
Coventry Health Care plunged 23 percent after the health insurer cut its earnings projection for the second quarter and full year.
The whole sector felt the crunch: Aetna skidded 5 percent and UnitedHealth lost 7 percent.
General Motors started the day at a 26-year low and just kept going; the stock is now trading below $15. GM delayed a planned redesign of its SUVs and light trucks as auto makers grapple with plunging truck demand and shift their focus to fuel-efficient vehicles.
In merger and acquisition news, Anheuser-Busch's board plans to meet this week for the first time since rival brewer InBev formally bid $46 billion for the company, the Financial Times reported, in a signal the U.S. company may not be ready to completely reject the Belgium brewer's bid.
Still to Come:
THURSDAY: Philly Fed survey; leading indicators; natural gas inventories; Fed advisory panel meets to discuss credit-card regulation
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