Stocks opened higher Thursday as a successful bond auction in Spain helped assuage debt fears but quickly erased their gains after a one-two punch of disappointing data: Jobless claims jumped last week and the Philly Fed gauge of manufacturing activity tumbled.
The Dow Jones Industrial Average was down more than 30 points, after gaining less than five points in the previous session.
Consumer staples and technology were the best performers on the S&P, while consumer discretionary and materials were among the laggers.
In U.S. economic news, jobless claims rose by 12,000 last week; economists had expected to see a decline. A separate report showed the Philly Fed manufacturing gauge tumbled to 8 in June from 21.4 in May. Plus, leading indicators rose 0.4 percent and consumer prices fell 0.2 percent, both in May. Excluding volatile food and energy costs, however, prices rose 0.1 percent.
The Philly Fed report had rattled the market's confidence in the recovery but Ian Shepherdson, chief U.S. economist at High Frequency Economics, noted that the headline number is a gauge of overall sentiment, not a weighted sum of the parts, which weren't down as much as the headline number.
"We interpret the drop in the headline as a sign of anxiety triggered by the drop in stock prices, but so far the impact on actual activity seems to have been modest," Shepherdson wrote in a note to clients.
Earlier, a Spanish bond auction of 10- and 30-year notes was met with strong demand, which helped assuage concerns about the nation's ability to meet its debt obligations this year.
Shares of BP opened higher after the company agreed to set aside $20 billion in escrow for claims against the oil spill and as CEO Tony Hayward was grilled on Capitol Hill.
Watch a live video feed of the hearing
The $20 billion pricetag could grow much faster in coming months if the Justice Department files criminal charges against the company. Even misdemeanor convictions under environmental laws could produce large fines under general federal criminal statutes, which could inflate BP's total bill.
Bank of America-Merrill Lynch downgraded BP to "neutral" from "buy" on fears that the cleanup costs will make the company less competitive. Barclays Capital also cut BP to "underweight" on concerns over cleanup costs.
Analysts were divided, though, with Credit Suisse raising its view on the company and Citigroup saying BP can meet its financial obligations.
Big banks, including Bank of America, JPMorgan and Citigroup , were higher amid buzz that the banks may put an end to free checkingfor customers to make up for lost revenue due to tighter regulations on other fees.
Homebuilders skidded after a brokerage downgraded five stocks in the sector, including KB Home , to "sell."
Apple rose to a record near $273 after the company said it sold more than 600,000 of its new 4G iPohones in one day — a new record.
On the earnings front, Aetnaraised its second-quarter forecast, driven by better-than-expected underwriting margins amid higher health-care costs, and grocery chain Kroger backed its full-year outlook.
This was encouraging, particularly after FedEx and Nokia delivered disappointing outlooks a day earlier.
Some investors worried that the FedEx outlook was a bad omen for earnings season— that more companies may follow and that it could signal a double-dip is coming.
But Nadav Baum, executive vice president at BPU Investment Management in Pittsburgh, said don’t read too much into individual warnings.
“I think we’re in a rebound mode … Some companies will disappoint — it’s not a reflection on the economy or the market,” he explained.
Two IPOs debuted above their offering prices today — oil and gas exploration company Oasis Petroleum and college banking-services firm Higher One Holdings . But mobile Internet anda data firm Motricity slashed the size of its IPO and delayed pricing it for a day. That stock will trade under the symbol "MOTR."
CBOE continued to trade higher, topping $32.
Still to Come:
FRIDAY: Quadruple witching; S&P indexes rebalanced
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