Stocks Close Lower, Hurt by Reports Of a Weakening Economy

Stocks finished lower for the day, hurt by several reports showing weakness in the economy.

The Dow Jones Industrial Average closed down, as did the Nasdaq and the S&P 500 .

Dow laggards for the session included Alcoa , Dupont and Caterpillar.

AT&T was one of the few bright spots on the Dow throughout the session. CNBC's David Faber said he is hearing that a deal between AT&T and Bellsouth may close tomorrow.

Volume will likely be light on Friday ahead of the holiday weekend and no major economic data being released.

The Federal Reserve Bank of Philadelphia said its manufacturing survey of the mid-Atlantic states fell to -4.3 in December, much weaker than expected.

"The Philly Fed (report) was very disappointing, especially since the New York Fed's Empire State Index came in stronger than expected last week," David Wyss, chief economist at Standard & Poor's, told CNBC's "Power Lunch." "What really bothers me is that there’s a lot more manufacturers in Philadelphia than New York, so I’m taking that number more seriously."

Commodities turned to the downside as copper prices declined. Gold and copper stocks slid lower including Newmont Mining , Phelps Dodge and Freeport McMoRan .

Richmond Federal Reserve Bank President Jeffrey Lacker warned high inflation continues to be the main threat to the economy. Lacker, who has advocated a rate hike, will not be a voting FOMC member in 2007, but he remains hawkish.

The government revised third-quarter Gross Domestic Product to a 2% growth rate, down from the 2.2% expected. Weekly jobless claims rose by 9,000 to 315,000.

The Energy Department said natural gas inventories dropped by 71 billion cubic feet last week, basically in line with analysts' estimates. Natural gas prices fell on the news.

Crude oil prices also fell below $63 a barrel as analysts attributed the latest drop in oil inventories to temporary shipping problems.

The Conference Board reported that the index of leading economic indicators rose 0.1% in November, in line with forecasts from economists. The private research group said slow economic growth will likely continue in the near-term.

Earnings were in focus in early trading.

General Mills reported second quarter earnings of $1.08 per share, beating the $1.03 per share that was forecast by analysts surveyed by Thomson First Call. The packaged foods company also boosted year guidance, but remained cautious about its fiscal second half.

ConAgra reported higher quarterly profits, crediting improved operating margins and gains from the sale of product lines. The company says it earned 43 cents per share in the second quarter compared with 29 cents a share in the same period a year ago.

Rite Aid posted a small quarterly profit but the nation's No. 3 drugstore chain reported a loss of 1 cent per share after paying preferred stock dividends. Analysts surveyed by First Call had estimated a loss of 2 cents per share.

CNBC's Mike Huckman reported that Boston Scientific Corporation has signed a two-year deal to be the exclusive supplier of stents to the Cleveland Clinic. The deal, estimated at approximately $18 million a year, prohibits the clinic from buying stents from Johnson & Johnson unless a safety issue arises with the Boston Scientific devices.

Bristol-Myers Squibb says it has agreed to pay $499 million to settle a federal investigation into questionable drug pricing and marketing practices. The company lowered its full-year guidance to 72-77 cents per share from 97 cents to $1.02 to reflect the charges. Analysts surveyed by Thomson First Call were expecting earnings per share of $1.04.

According to CNBC's David Faber, bankers say Bristol-Myers could be an acquisition target next year now that this settlement has occurred and once the trial of the generic version of blood-thinner Plavix begins in January.

Euro Markets Struggle

London's FTSE-100 declined, as shares of telecom bellwether Vodafone Group sank. Vodafone's board will meet Thursday to consider offering $13.5 billion for Hutchison Essar, the fourth biggest mobile phone operator in India, the Financial Times reported.

Paris' CAC-40 closed slightly lower. Advertising group Publicis climbed nearly 3% after agreeing Wednesday to buy interactive ad agency Digitas for $1.3 billion.

The Frankfurt DAX also finished down.

Elsewhere in Europe, shares of Irish airline Aer Lingus climbed, while those of low-cost carrier Ryanair declined. On Wednesday, Ryanair said it was withdrawing its hostile bid for Aer Lingus after European regulators decided to look further into the offer.

Asian Stocks Close Mixed

Japan's Nikkei 225 closed higher as the yen fell against the dollar, prompting investors to flock to exporters such as Toyota and Sony.

In Hong Kong, the Hang Seng ended down and Thailand's SET Index fell after rebounding on Wednesday following the Thai government's decision to rescind capital controls on equity investments.