Stocks fell after trading in a narrow range all day while investors waited for Friday’s jobs report, the last key economic indicator before next week's Federal Reserve meeting.
The Dow Jones Industrial Average endedlower after showing limited range through the session. The Nasdaq also fell, as did the S&P 500.
Analysts expect the Labor Department to report that the economy added 110,000 new non-farm jobs in November. Earlier Thursday, the government said first-time unemployment claims fell to 324,000 last week, about in line with the consensus estimate of 325,000. In October, the unemployment rate fell to a five year-low of 4.4%.
Friday's jobs report will provide a quick read on the health of the economy and may provide an indication of the strength of the holiday shopping season.
The Federal Reserve has held its benchmark interest rate steady for three sessions in a row. It had boosted interest rates 17 times starting in June 2004 in an effort to stem inflation and halted the increases in August.
Conrad Dequadros, senior economist at Bear Stearns, said he expects to see decent job growth in the service sector and declines in manufacturing and construction, especially home building.
"I think we're likely to see the rest of the economy perform well," he said. "I think we'll see the unemployment rate remain quite low."
Crude oil futures rose on the New York Mercantile Exchange to $62.21 a barrel, but the prospect of a mild winter and lower demand for heating oil whacked oil stocks. ExxonMobil fell, but Chevron rose on news of a planned $5 billion share buyback program and increased exploration.
Homebuilders took a continued hit in the downbeat housing market. Toll Brothers, Centex and Pulte Homes fell.
Officials at XM Satellite and Sirus said they see synergies, but also major differences between the two companies and neither expressed an urgency to complete a deal despite slowing sales.
Pharmaceutical companies caught investors' attention. Shares of Vanda Pharmaceuticals surged after the company reported positive results from a late-stage clinical trial of iloperidone, an anti-psychotic drug for patients with schizophrenia.
"We will be filing with the FDA by end of 2007 and this drug can be on the market as early as the beginning of 2009," Dr. Michael Polymeropoulos, Vanda Pharmaceuticals CEO, said on CNBC's Squawk Box.
Shares of Novartis rose after the company said results from a new study show its cancer drug Gleevec can still help treat chronic myeloid leukemia even after 5 years of use, the highest overall survival rate in history for the treatment of that illness.
Eli Lilly is under pressure after the company provided guidance at its annual analyst meeting in New York. The pharmaceutical giant reconfirmed 2006 sales and earnings guidance but projected disappointing profit growth for 2007 in the high single or low double digits, according to CNBC pharmaceuticals reporter Mike Huckman. Lilly also forecasted high single or low double digit growth from 2008 to 2010.
"We expect to launch on average one product per year until the end of the decade, so the top line growth will be driving the growth that I'm taking about," Sidney Taurel, Eli Lilly CEO, said on "Squawk Box." "Through our productivity efforts, we're going to be able to create the resources to invest in that growth both in our pipeline and our sales."
Shares of Yum , the parent company of Taco Bell, are under pressure again Thursday after the Food and Drug Administration said that there may also be possible E. coli cases in Delaware and Connecticut. At least 46 confirmed cases of E. coli illness have been linked to Taco Bell restaurants in New Jersey, New York and Pennsylvania.
Dow component Home Depot fell after the home improvement retailer said it found evidence of the backdating of stock options over nearly a 20-year period.
Investors will be looking at shares of News Corp. and Liberty Media after reports that Liberty will swap its stake in News Corp. for a stake in DirectTV, plus cash and three local sports channels.
And mortgage financier Fannie Mae was up as its investigation into its accounting woes finally came to a close. The company said late Wednesday that it had overstated earnings by $6.3 billion from 2001 through June 2004.
Europe Trades Higher
Investors were bullish in Europe, where there was enthusiasm about possible big acquisitions and favorable reaction to comments from the European Central Bank. London's FTSE-100, Frankfurt's DAX and the CAC-40all finished higher.
Stock markets remained positive in Europe after interest rate decisions from the European Central Bank and the Bank of England today.
As expected, the ECB boosted interest rates by 25 basis points to 3.5%. ECB President Jean-Claude Trichet downplayed risks of another interest rate rise in February of next year.
The Bank of England kept rates on hold at 5%.
Japan Tobacco Boosts Tokyo Shares
Tokyo finished at a month high Thursday, but other Asian markets were lower. Japan's Nikkei 225 average closed at a month high buoyed by Japan Tobacco, on the possible big for Gallaher, while exporters rose on the softer yen.
Hong Kong's Hang Seng Index fell sharply, pulled down by China Mobile after a stock sale by a major shareholder.
South Korea's Kospi Index closed slightly weaker. Singapore's Straits Times Index edged up.