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Stock market turns lower as an early rally evaporates; technology and retail stocks sink
NEW YORK (AP) ' An early rally on the stock market faded Thursday afternoon, leaving indexes slightly lower in the last hour of trading. Technology companies and retailers had the biggest losses.
The Dow Jones industrial average was down 5 points after being up as many as 260 points shortly after the opening bell. The Standard & Poor's 500 index and the Nasdaq composite also fell.
Advanced Micro Devices Inc. plunged 16.3 percent, the most of any stock in the S&P 500, after the company cut its revenue and earnings forecast for the third quarter, saying it was having problems getting its chips made.
Retailers and other consumer discretionary stocks also tanked. Netflix Inc. fell 12.5 percent, Tiffany & Co. fell 9.3 percent and Abercrombie & Fitch Co. fell 6.6 percent.
At 3:15 p.m. the Dow was down 5 points, or 0.1 percent, to 11,003.
The Standard & Poor's 500 index fell 8, or 0.7 percent, to 1,143.
Technology stocks fell more than the rest of the market. The Nasdaq composite index lost 51, or 2 percent, to 2,441.
Analysts said stock trading was likely to remain volatile until investors got more certainty about Europe's debt crisis and the U.S. economy. "Until we start to see more clarity on policy intervention, we'll continue to see this intraday, manic market reaction," said James Dailey, chief investment officer of TEAM Financial Managers Inc.
Stocks rose sharply in early trading after the government reported that first-time applications for unemployment benefits fell to a five-month low. The government also raised its estimate of economic growth in the April-June period. The Commerce Department said the economy grew at a 1.3 percent annual rate in the second quarter, up from its previous estimate of 1 percent.
Other economic reports came in relatively weak. A trade group survey showed that chief executives of the nation's largest companies are more pessimistic than they were just three months ago. Also, fewer Americans signed contracts to buy homes in August, the second straight month of declines.
In Europe, German lawmakers voted to expand the powers of the region's bailout fund. The measure must be approved by all 17 countries that use the euro. The plan will allow the bailout fund to buy government debt and lend money to troubled European countries. Finland approved the measure Wednesday.
Banks, which would have the most to lose if Europe's debt crisis gets worse, rose more than the rest of the market. JPMorgan Chase & Co. rose 0.3 percent, and U.S. Bancorp rose 1 percent.
Analysts cautioned that bank stocks remain vulnerable if Europe stumbles in its efforts to contain its debt crisis. "Investors need to be very careful, because there is still a vast labyrinth of potential challenges that remain to be cleared with regard to Europe," said Frank Barbera, a portfolio co-manager of the Sierra Core Retirement Fund.