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Stocks Waver as Market Digests Earnings

Stocks wobbled Thursday as investors digested a mixed bag of earnings and economic news.

The Philadelphia Federal Reserve's report on regional manufacturing activity showed a fifth straight month of contraction. The Fed branch's business-activity index shrank to minus 24.9 in April from minus 17.4 in March. Economists had expected a reading of minus 15.

The Philadelphia report is widely seen as a precursor to the ISM's national reading on manufacturing, due out on May 1.

The Conference Board's gauge of leading indicators ticked up 0.1 percent in March, snapping a five-month losing streak. Economists had expected an unchanged reading after a 0.3 percent decline in February.

The number of people applying for initial unemployment benefits rose by 17,000 last week, less than the 20,000 expected. The four-week moving average, which smooths out weekly fluctuations, fell by 750 claims to 376,000.

The latest batch of earnings included a miss from Merrill Lynch and an increased forecast from IBM.

"Every day is a different day when you're looking at earnings," Peter Costa, of Eckhart & Co., told CNBC. "You've got to look at the much-bigger picture ... the dollar still stinks, oil's at $114 a barrel." Earnings season will be tough but "We'll get through it," Costa said. "We've got to get through ... the next week and a half and then we'll see where the market goes from there."

Costa said the Dow may have been down 150 to 170 points today, but IBM's results will likely provide some support.

Merrill Lynch reported a loss -- including preferred stock dividends -- of $2.14 billion, or $2.19 a share, compared with a profit of more than $2 billion a year earlier. The loss from continuing operations was $2.20 per share, more than the $1.96 analysts had expected, according to Reuters Estimates.

Merrill also took writedowns totaling $4.5 billion for the quarter and said it plans to cut 4,000 jobs. Sources tell CNBC that the investment bank may need to raise additional capital, despite contrary remarks last week from CEO John Thain.

(Check out all the latest earnings news and earnings surprises.)

JP Morgan Chase, which reported better than expected resultson Wednesday, is planning to sell $6 billion in non-cumulative perpetual preferred shares, according to a report in International Financing Review, a Thomson publication.

IBM , the biggest gainer on the Dow, reported after the closing bell Wednesday that net income rose 26 percentto $2.32 billion. Total revenue, of which two-thirds comes from outside the U.S., increased 11 percent. Shares jumped in after-hours trading as two key metrics met expectations: hardware and services sales. Analysts had been concerned that, since a quarter of services revenue comes from financial firms, it might fall short, but it didn't.

Big Blue also raised its outlook again. In a statement accompanying the earnings report, CEO Sam Palmisano said, "We feel good about the rest of the year."

Online auctioneer eBay also beat expectations, with a 22 percent increase in net income. The company, which is in the midst of an overhaul to promote long-term growth, also boosted it its 2008 revenue forecastby 2 to 3 percent, pegging revenue between $8.7 and $9 billion.

Earnings from the world's biggest handset maker, Nokia , were in line but shares fell when the company lowered its outlook.

Diversified manufacturer United Technologies reported an earnings gain of 22 percent.

Pfizer , the Dow's biggest decliner, also fell short of its earnings targetas competition from generic medications hit its prescription drug business, particularly that of its cholesterol buster, Lipitor.

Swiss drug maker Roche missed forecasts with an increase of just 2 percent in first-quarter sales in local currencies, hit by plunging Tamiflu revenue and a slowing pace of growth for cancer drugs.

This Week:

THURSDAY: Fed's Kohn, Fisher speak; Capital One, Google earnings after the bell
FRIDAY: Caterpillar, Citigroup, Honeywell, Xerox earnings; Fed's Lacker, Rosengren speak

Send comments to cindy.perman@nbcuni.com.