Stocks Pare Losses as Home Sales Rise

Stocks pared their losses Thursday after a report showed existing-home sales rose and the supply of homes on the market started to shrink.

Stocks had a rocky start as investors shrugged off a drop in jobless claims, focusing instead on some weak corporate outlooks.

The Dow was down about 50 points, or 0.5 percent, after being down more than 100 earlier. The S&P 500 and Nasdaq were down more than 0.7 percent.

Existing-home sales rose by 6.8 percentlast month and the supply of homes on the market fell to an 8-month supply from 8.5 months in the prior month.

Homebuilder stocks were some of the only gainers today, along with some retail names and Amazon , which reports after the bell.

Earnings season had been chugging along nicely, with more than 80 percent of the S&P 500 names reporting so far beating expectations.

The latest batch of earnings was good but the outlooks from several disappointed, including eBay , Qualcomm , Abbott Labs and Gilead Sciences.

Just a day after Qualcomm said it was seeing weakness in demand for its cellphone chips, Finnish handset maker Nokia missed its earnings target and lowered its outlook for margins, citing competition from Research In Motion , Apple and others.

So, while Apple seems to be defying the economic slump, reporting blowout earnings and a great outlook, it doesn't seem to be taking the whole sector with it.

U.S.-traded shares of Nokia got hammered, falling more than 10 percent this morning. Qualcomm was down more than 5 percent and Motorola was off more than 3 percent.

Greece also took a toll on the market following news that it had an even bigger budget deficit in 2009 than previously thought. And, investors are now ratcheting up worries about other debt-burdened nations, including Portugal.

Traders had been cycling into recovery plays like tech and industrials amid some encouraging economic signs, like today's report that showed weekly jobless claims fell by 24,000 last week.

But today's sector plays reflect a potential shift: The best performers were utilities, consumer discretionary AND consumer staples, while health care, telecom and tech were the weakest links.

"The market is tired," said Michael Cohn, chief investment strategist at Atlantic Asset Management. "I'm kind of in a 'sell in May—go away' mode here," he said.

Cohn said he's not taking all of his money off the table, but rather selling the stuff that's done well and "maintaining a position in the defensive group."

On the consumer front, Pepsi beat earnings expectations but disappointed with revenue, while Starbucks beat and raised its outlook, saying more customers are coming to its coffee shops — and they're spending more.

European shares were lower with banking stocks falling as concerns over Greece's debt situation continued. Asian stocks ended mixed after the lackluster U.S. close.

U.S. markets have had a mixed week so far, although the Dow has registered gains in nine of the past ten trading days — and despite today's weakness, some investors say the overall trend is still upward.

"The market is clearly in an up trend… we don't expect that to change any time soon as long as the trend is to spend in the U.S. as well as by other major central banks worldwide," Aaron Smith from Superfund Financial told CNBC Thursday.

"Anyone who has any sense from a technical standpoint would be long," Smith added.

Some big earnings to note after the bell today, including Amazon , American Express , and Microsoft .

Bank stocks took a hit today as President Obama is due in New York to give a speech on why financial reform is necessary.

Still to come: President Obama will give a speech at New York's Cooper Union College, expected to focus on financial regulation reform. It is scheduled to start at 11:55 am.

Meanwhile, Moody's has cut its credit rating on automakerToyota to its lowest level ever, saying problems stemming from its recalls could pressure profits through 2012.

Qwest Communications and CenturyTel are in advanced merger talks and a deal could come within 24-48 hours, according to the Wall Street Journal. It would be one of the biggest telecom deals in recent years.

Not a good day for IPOs: There were five that priced last night, all at the low end or below the expected range, including Codexis, DynaVox, Alimera, Global Geophysical, and SPS Commerce.

Still to Come:

THURSDAY: Earnings from Express, Microsoft & Capital One after the bell
FRIDAY: Durable-goods orders; new-home sales; Earnings from Travelers, Honeywell, Schlumberger & Xerox

Send comments to cindy.perman@nbcuni.com.