Stocks got the new quarter off to a weak start Thursday after disappointing reports on housing, manufacturing and jobless claims. But the market ended off its lows amid some short-covering.
The Dow Jones Industrial Average ended down 41.49, or 0.4 percent, to close at 9,732.53, after being down more than 150 earlier.
The S&P 500 shed 0.3 percent and the Nasdaq lost 0.4 percent.
The CBOE volatility index, widely considered the best gauge of fear in the market, fell back below 33 after topping 36 earlier.
This comes after the Dow ended the second quarter down 10 percent, the worst quarter since the first quarter of 2009 — and the first quarterly decline since then.
Today's economic data was disappointing, particularly ahead of Friday's jobs report:
Pending-home sales plunged 30 percentin May from April, more than twice the 13-percent decline expected. Construction spending fell 0.2 percent, less than expected.
The ISM reported its gauge of manufacturing activity dropped to 56.2in June from 59.7 in May; economists had expected a smaller dip to 59.
Earlier, a report showed initial claims for unemployment benefits rose by 13,000 last week to to 472,000; economists had expected claims to fall.
That was the third of the week's disappointing jobs reports. Separate reports showed planned layoffs rosein June and private companies added just 13,000 jobs in June, well below expectations.
As for Friday's jobs report from the government, economists expect to see 110,000 jobs were lost from nonfarm payrolls in June, according to the latest Reuters survey, which would snap a five-month streak of gains.
Financials were the weakest sector, with Bank of America the biggest decliner on the Dow.
The House has passed the financial-reform reform bill but the Senate will not be dealing with the legislation until after the July 4th holiday recess.
Global concerns added to the pressure on the market after a report showed Chinese manufacturing growth slowed in June and as the S&P and Moody's warned of a possible credit downgrade on Spain.
Spain completed a 3.5 billion euros ($4.3 billion) auction Thursday and demand was weaker than at prior auctions. France also sold nearly 7.5 billion euros in government bonds.
Famous investor Jim Rogers told CNBC a bubble was forming in bond markets and inflation is already here.
Citigroup ended up half a percent as the U.S. Treasury said it it sold 1.1 billion shares of the stock.
McDonald's and Microsoft were the Dow's best performers.
The short euro/long gold trade appeared to be unwinding, with gold falling nearly $40to settle at $1,206.30 an ounce and the euro gaining against the dollar. Gold stocks were down a good 4 to 5 percent.
Shares of electric-car maker Tesla ended lower for a second straight day, after starting both days earlier. The stock jumped 40 percent on its debut Tuesday but has ebbed in the past two sessions.
Ford gained nearly 5 percent after the auto maker reported its sales rose 15 percent in June.
Chrysler sales were up 35 percent, while General Motors sales fell 13 percent. Economists expect overall U.S. sales fell 10 percent last month.
Toyota is considering another recall — this one would be up to 270,000 cars to eliminate possible engine failure.
Volume was slightly above average, with about 1.6 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 3 to 2.
Still to Come:
FRIDAY: June jobs report; factory orders
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