NEW YORK - Stocks mostly declined Thursday after a weaker-than-expected reading on the nation's economic output and a surprise jump in weekly unemployment claims stirred concern about the health of businesses and consumers.
But a $4.5 billion cash offer from Bristol-Myers Squibb Co. for its cancer drug partner ImClone Systems Inc. buoyed the technology stocks and the tech-heavy Nasdaq composite index.
The Commerce Department's report that gross domestic product grew at a 1.9 percent pace in second quarter disappointed investors. Economists polled by Thomson Financial/IFR had expected that growth in GDP, which reflects the value of all goods and services produced within the U.S., would come in at 2.4 percent.
Investors are also concerned by a Labor Department report that the number of people seeking jobless benefits jumped to 448,000 last week, an increase of 44,000 from the previous week. Economists had been expecting a decline of 8,000.
But stocks pulled off their lows as oil declined and after an index of Midwestern business activity indicated growth. The Chicago Purchasing Managers' index, which measures business conditions across Illinois, Michigan and Indiana, showed modest growth for the first time in five months. The reading of 50.8 topped the 49.6 seen in June and the 49 that economists had expected. A figure above 50 signals growth, while a reading below that level indicates contraction. The index, which is regarded as an early read on a national manufacturing index due Friday, last topped 50 in January, when it reached 51.5.
In midmorning trading, the Dow Jones industrial average fell 34.28, or 0.30 percent, to 11,549.41. The Dow jumped more than 180 points Wednesday, bringing its two-day gain to more than 450.
Broader stock indicators traded mixed. The Standard & Poor's 500 index slipped 0.29, or 0.02 percent, to 1,283.97, while the Nasdaq rose 21.16, or 0.91 percent, to 2,350.88.
Light, sweet crude fell $2.13 to $124.64 on the New York Mercantile Exchange after rising more than $4.50 on Wednesday.
The latest GDP reading, which reflected consumers cashing tax rebate checks, still shows the economy grew at a faster pace than the weak 0.9 percent seen in the first quarter. But revised numbers also reveal that the economy shrank in the fourth quarter last year.
Thursday's stock market pullback follows the gains of the two previous sessions when investors bet on a rebound in the beaten-down financial sector and grew more optimistic about the Labor Department's important July employment report on Friday.
But even as stocks have rallied at times in recent weeks investors have remained concerned about the housing and credit markets, the health of financial companies and the effect of high commodities prices. A pullback in oil in the past few weeks has raised some hopes that inflation could remain in check. Stocks managed to rally Wednesday in the face of rising oil prices, a rare occurrence.
In corporate news, Wall Street applauded the move by drug developer Bristol-Myers to pay $60 per share for ImClone, a 30 percent premium to ImClone's closing price of $46.44 Wednesday. Bristol-Myers, which already owns about 17 percent of ImClone, is a U.S. partner for the colon and head and neck cancer drug Erbitux. ImClone surged $17.54, or 38 percent, to $63.98. Bristol-Myers slipped 31 cents to $21.20.
Investors also sifted through a flurry of quarterly profit reports.
Exxon Mobil Corp. reported second-quarter earnings of $11.68 billion, the largest quarterly profit ever by a U.S. corporation. However, the company's per-share results fell well short of Wall Street's forecast. Analysts had been expecting that record crude prices would push earnings higher. The stock fell $2.77, or 3.3 percent, to $81.61.
Motorola Inc. rose 86 cents, or 11 percent, to $8.54 after posting a surprise profit for its second quarter. The company said it shipped more cell phones than in the first quarter.
Eastman Kodak Co. reported a second-quarter profit but the results missed Wall Street's forecast. The stock declined 86 cents, or 5.5 percent, to $14.91.
CVS Caremark, the drug store and pharmacy operator, said its second-quarter earnings rose 7 percent following stronger sales at its retail drug stores. The stock fell 95 cents, or 2.5 percent, to $37.62.
Diversified manufacturer Tyco International Ltd. rose $3.24, or 7.7 percent, to $45.75 after the company said it swung to a fiscal third-quarter profit from a loss a year earlier when the company booked charges.
Declining issues narrowly outpaced advancers on the New York Stock Exchange, where volume came to 329.1 million shares.
The Russell 2000 index of smaller companies rose 1.06, or 0.15 percent, to 719.92.
Overseas, Japan's Nikkei stock average closed up 0.07 percent. In afternoon trading, Britain's FTSE 100 fell 0.51 percent, Germany's DAX index declined 0.31 percent, and France's CAC-40 fell 0.63 percent.
Source: http://news.yahoo.com/s/ap/20080731/ap_on_bi_st_ma_re/wall_street;_ylt
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