Stocks declined Thursday as dismal reports on factory orders and jobless claims piled on to a market already on edge about a freeze in the credit markets and the bailout bill as it heads to the House.
Factory orders tumbled 4 percent in August, more severe than the 2.5 percent expected, and July was revised lower. Jobless claims rose by 1,000to their highest level since September 2001, the Labor Department reported. That comes ahead of Friday's employment report, which is expected to show that U.S. employers cut 100,000 jobs from nonfarm payrolls last month.
Still to come is a report on factory orders at 10 a.m. ET. Economists expect a 2.5-percent drop.
Even before the jobless report, the market had been on edge after the Senate late Wednesday approved a sweetened version of the $700 billion bailout package for banks.
Volatility is still ahead as the House of Representatives, which surprised markets by rejecting the plan on Monday, is expected to vote on the new bill Friday.
In Europe, the ECB left interest rates unchangedat 4.25 percent but ECB president Jean-Claude Trichet's speech will be closely watched to see how he plans to tackle Europe's banking crisis.
In the U.S., Federal Reserve officials are weighing further interest rate cuts, even if Congress approves the bailout, because of the worsening economic outlook, the Wall Street Journal reported on its Web site in an unsourced report.
The Securities and Exchange Commission said late Wednesday that it would extend the ban on short-selling in more than than 950 financial stocks in a bid to give lawmakers more time to pass the rescue package.
The government should take stakes in banksin order to recapitalize them rather than instituting the $700 billion bailout, Hugh Hendry, chief investment officer and Partner at Eclectica Fund, told CNBC on Thursday.
Banks were mixed: Regional banks such as National City and Sovereign Bancorp rose more than 10 percent, while big banks such as Bank of America and JPMorgan declined.
The SEC is investigating whether traders spread rumors to drive down shares of former investment banks Bear Stearns and Lehman Brothers, USA Today reported, citing an SEC subpoena.
Also in the financial sector, UBS said it expected to make a small profit in the third quarter of 2008, putting an end to a string of negative quarters and defying the market crisis.
CNBC.com-parent General Electric fell another 9 percent, adding to the 4 percent it lost Wednesday, after the conglomerate announced an offering of 547.83 million shares of GE stock priced at $22.25 a share.
GE said Wednesday it planned to raise $12 billion through a common stock offering, and that it is selling $3 billion of preferred shares to Warren Buffett's Berkshire Hathaway.
American International Group shares rose gained 6 percent as the troubled insurer prepares to kick off an asset sale.
THURSDAY: Factory orders; natural-gas inventories; Fed's Bullard speaks; earnings from Constellation Brands
FRIDAY: August jobs report; ISM services index; earnings from Family Dollar
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