Stocks turned mixed Thursday as Treasury Secretary Henry Paulson said the U.S. economy has "turned down sharply."
Not only has the economy fallen sharply but there are still risks from the housing and finance sectors, Paulson said in remarks to the Council of Institutional Investors.
Paulso said a commitment by housing-finance companies Fannie Mae
"That's very, very important. What they do here is going to be more important than a lot of things that are being considered by Congress right now," Paulson said. "It's very important that they continue to play an active role."
Earlier, stocks had opened higher after DuPont and Wal-Mart -- both Dow components -- raised their guidance and jobless claims came in better than expected.
Jobless claims fell by 53,000-- more than double of what was expected -- last week to 357,000, the Labor Department reported. The four-week moving average, however, rose to 378,250 from 375,750.
In other economic news, the U.S. trade deficit unexpectedly rose for a second straight month in February, hitting $62.3 billion as a jump in imports of foreign-made cars offset the first decline in oil imports in a year.
The Bank of England cut UK interest rates by a quarter percentage point to 5 percent, as the pace of decline in UK housing prices accelerated last month to levels not seen since September 1992. It was the third time the BOE has lowered rates since December.
The European Central Bank held interest rates at 4 percent, as expected. While other central banks are able to cut interest rates in order to promote economic growth, the ECB's hands are tied: A mandate required it to focus solely on price stability.
The big buzz of the day is that Rupert Murdoch has joined in the battle for Yahoo .
News Corp. is apparently in talks with Microsoft to make a joint bid for Yahoo, according to people involved in the discussions. The combination, which would join Yahoo, Microsoft’s MSN and News Corporation’s MySpace, would create a behemoth that would upend the Internet landscape.
A day earlier, the angle of this Silicon Valley soap opera was that Yahoo was in talks to carry Web-search advertising from Google as part of a broader outsourcing deal. And, Legg Mason -- a major Yahoo shareholder -- was said to be on deck and ready to support Yahoo's campaign for independence should Microsoft lower its bid.
In US banking news, Lehman Brothers said in a regulatory filing that it had liquidated three poorly performing funds and put the $1 billion in assets on its balance sheets. Shares of the investment bank were off 2.8 percent in premarket trading.
Chemical maker DuPont raised its profit outlook this morning, saying strong growth in its agriculture businesses and emerging markets should help offset weakness in U.S. housing and automotive markets. The company now expects first-quarter earnings of $1.29 a share, up from its previous range of $1.14 to $1.19 a share.
Wal-Mart Stores raised estimates for its first quarter, citing expense controls and fewer markedowns. The company now expects earnings between 74 and 76 cents a share, up from its prior range of 70 to 74 cents a share. The discount-retail giant said its March same-stores sales excluding fuel rose 0.7 percent, in-line with the company's expectations; including fuel, such sales increased 1.1 percent.
Wholesale-warehouse club Costco said sales at stores open at least a year rose 7 percent in March, topping analysts' expectations of just 5.9 percent.
Wal-Mart and Costco were the exceptions, however, as most retailers report dismal same-store sales.
Hipper Wal-Mart rival Target reported a bigger-than-expected 4.4 precent decline in same-store sales, the latest in a string of disappointing results from the chain.
Specialty chains and department stores continued to struggle. Even upscale retailers are feeling the pinch, with Nordstrom and Saks posting declines of 9.1 percent and 2.9 percent, respectively, both of which were bigger decliners than expected.
However, high-end jeweler Tiffany said it expects a second half recovery in U.S. stores and is mulling expansion.
"We had a softer Christmas than we anticipated but we still believe that we're going through a rough patch in the first half of the year and that we'll see recovery in the second half," Tiffany President and Vice Chairman James Quinn told reporters at the World Retail Congress in Barcelona.
Regardless of good or bad reports, most retail stocks advancedThursday, which traders told CNBC was due to the fact that the sector was one of the most heavily shorted and the stocks haven't come off much from January lows, so the downside is limited.
Prospects look better for oil majors as well, as second-largest oil company Chevron said on Wednesday it should post higher first-quarter earnings than the previous quarter as record oil prices outweighed weak margins from refining and marketing.
THURSDAY: Retailers' same-store sales reports; Bernanke speaks about President's Working Group; U.S. budget; Earnings from Genentech
FRIDAY: Import prices; consumer sentiment; GE earnings; G7 finance chiefs meet in Washington
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