Stocks turned mixed as retail stocks skidded on news of weaker-than-expected December sales.
The Dow Jones Industrial Average fell more than 40 points a day after the market closed at multi-year highs Wednesday in the wake of a surprising rise in private sector jobs.
Verizon AT&T and Alcoa slid, while Boeing and Hewlett-Packard advanced.
S&P 500 fell slightly, while the Nasdaq gained. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 17.
Among key S&P 500 sectors, telecom, consumerdiscretionary and energy rose, while technology declined.
"The market has done so well over the last month or two...so maybe there’s just a little bit of fatigue," Neil Karchem, senior equity analyst at Bel Air Investment Advisors told CNBC.com.
Shares of Citigroup garnered attention as the once struggling bank's shares traded around $5 a share.
On the tech front, the annual Consumer Electronics Show (CES) in Las Vegas was underway, which was generating some buzz in the tech sector.
"This year a lot of focus on tablets and smartphones, and everything in that food chain is starting to do well," said Neil Karchem, senior equity analyst at Bel Air Investment Advisors.
As a result, many semiconductor stocks advanced, including Nvidia , NetLogic and Trident Microsystems .
In other news, Microsoft said that it would use chip designs fromARM Holdings in the latest version of its Windows operating system. Shares of ARM jumped in London trading.
Disappointing results from the nation's retailers in December weighed on the market. Analysts said the post-Christmas blizzard on the East Coast contributed to the lackluster results, as the week after Christmas typically brings in 15 percent of all seasonal sales.
The price of oil remained around $90 a barrel, while gold edged slightly lower. The dollar made slight gains against the euro, but was flat against the yen.
Target shares slipped after the big-box chain badly missed expectations for December. Sales rose just 0.9 percent against expectations of a 4 percent gain. Macy's shares dropped as it posted a 3.9 percent gain, instead of a 4.4 percent gain, as expected. Other department stores didn't fare much better, including JC Penney and Kohl's.
Other disappointments came from American EagleOutfitters, which reported an 11 percent drop in sales and a lowered profit forecastand, Gap also reported disappointing sales, as did Wet Seal and Zumiez, although Limited's results were better-than-expected. The winner among teen retailers was Abercrombie & Fitch, which reported same-store sales jumped 17 percent.
GM shares advanced after news an analyst at Morgan Stanley said: While it’s too early to give the company the benefit of the doubt, we believe GM has the potential to one day produce the earnings and cash flow required to justify a valuation closer to $100 than $50." The brokerage currently has a price target of $50 for the automaker, one of the highest on the Street.
ExxonMobil shares edged higher in pre-market trading after Oppenheimer upgraded the company to "outperform" with a $90 price target. Oppenheimer based the move on steadily increasing oil prices which it said will allow the company to accelerate its share repurchases and grow its dividend.
Bank of America rose more than 1 percent in pre-market trading after the company said it was going to start hitting customers with new fees associated with costs incurred from the Dodd-Frank financial reform legislation.
BP shares rose despite a White House reportthat blamed the oil giant as well as its Transocean and Halliburton , for cost cutting decisions that led to the largest offshore oil spill in history. The White House commission said BP and its partners in the Macondo well didn't have a system to ensure their procedures were safe.
In earnings news, Monsanto slipped slightly in pre-market trading after reporting earnings results largely in line with expectations, and reaffirming earnings goals for the full year. Analysts had earlier raised price targets for the world' largest seed company. Constellation Brands fell in pre-market trading despite reporting a stronger-than-expected quarterly profit.
In U.S. economic news, initial claims for unemployment rose by 18,000 last weekto 409,000, up from an upwardly revised 391,000 the week before, the Labor Department said. Economists surveyed by Reuters had expected claims to rise to 400,000, from a previously reported 388,000.
The four-week moving average for claims, however, fell 3,500 to 410,750, the lowest level since July 2008.
Now the market will turn attention to the release of nonfarm payroll data on Friday. The government is expected to report payrolls rose by 175,000, up from only 39,000 in November, while the unemployment rate is expected to fall to 9.7 percent from 9.8 percent, according to Reuters.
Goldman Sachs chief economist Jan Hatzius expressed doubts about the methodology used by ADP to assess private sector employment and said he expects a below-consensus growth of 100,000 nonfarm jobs.
"Despite our generally upbeat view on the economy, which continues to be reinforced by incoming data, we view the dramatic improvement shown in the ADP report with skepticism," Hatzius wrote in a note to clients.
And in politics, Paul Volcker, who is 83, wants to leave his role as head of a panel of experts advising President Barack Obama on economy issues, according to a Reuters report.
European shares were broadly higher with banking stocks leading the gains. China upped its holdings of euro zone debt, including that of Spain's troubled economy, signaling its support for the region, the Chinese Commerce Ministry said. Asian indexes were mixed at the close, but the Nikkei 225 ended sharply higher.
On the Calendar This Week:
THURSDAY: Chain store sales, Monster employment index, natural gas inventories, Treasury STRIPS, money supply.
FRIDAY: Nonfarm payrolls report, consumer credit; Federal Reserve Chairman Bernanke speaks, Federal Reserve Vice Chairman Janet Yellen speaks.
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