Stocks Close Lower, Hurt by Plunging Dollar And Higher Oil

Stocks closed lower as a better-than-expected earnings report from financial bellwether Goldman Sachs was offset by record-high crude prices and a plunging greenback.

"When Bernanke cut rates people thought the glass was half-full now today it looks like it is half-empty," said Phil Roth, chief technical analyst with Miller Tabak.

"(The economy) will not turn around with one Fed ease. Stocks have rallied, benefiting from the decline in short-term interest rates but now people are worried about other things like of plunging dollar or soaring commodity prices. There are a lot of problems."

Overall declines were modest, however, in light of recent broad market gains of more than 3%. The Dow Jones Industrial Average fell 48 points, or 0.35%. The S&P 500 fell 0.7% while the Nasdaq Composite declined 0.5%.

The dollar sank to a 15-year low against major currencies as the euro rose above $1.40 for the first time, as global markets continued to react to the U.S. Federal Reserve's recent interest rate cut. Gold surged to a 28-year high above $730 an ounce.

Earlier today, Fed Chairman Bernanke said in a prepared speech to Congress that subprime delinquencies were likely to rise further but the Fed was committed to preventing new lending problems while preserving responsible subprime lending.

The trader downplayed the significance of Congressional testimonies given by Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson.

"The market is pausing and refreshing -- nothing goes up in a straight line forever," said Dan McMahon, head of listed trading at CIBC World Markets. "I think everyone is taking a breather."

Goldman Sachs said quarterly earnings surged 79% due to increased revenue from investment banking and trading. Goldman said net income rose to $6.13 a share in its fiscal third quarter, compared to $3.26 a share a year earlier.

Bear Stearnsdid not fare as well, reporting a quarterly earnings decline of 61% on bad subprime mortgage bets and volatile fixed-income trading.

FedEx said quarterly profit rose despite a slowing U.S. economy but shares fell after the transportation bellwether revised its outlook for the full year and forecast second-quarter profit below consensus estimates.

Shares of Circuit City plunged after the electronics retailer badly missed analysts' income estimates. The company, which reported a quarterly loss, also announced job cuts due to flagging sales.

The CBOE Volatility Index held steady around $20.

New York light sweet crude futures rose above $82 a barrel after new data Thursday showed a decline in U.S. weekly inventories. Traders were also paying close attention to a potential tropical storm threat to oil and gas installations in the Gulf of Mexico.

In economic news, jobless claims fell unexpectedly by 9,000 last week to 311,000.  Economists surveyed by Thomson Financial were predicting a slight rise in claims.

Leading indicators for August, comprising 10 closely-watched components, plunged 0.6%, pointing to slower economic growth ahead. A survey saw leading indicators flat from July's 0.4% rise.

European stocks drifted lower Thursday as the positive sentiment in the wake of Tuesday's Federal Reserve rate cut subsided. Asian markets closed mixed, in lackluster trading.

Treasury prices declined, sending yields higher.