NEW YORK (CNN/Money) -
Stocks slipped Thursday after a two-day advance amid investor jitters about oil prices, the economy and Federal Reserve policy in the wake of Hurricane Katrina.
As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a flat open for stocks on Friday, when fair value is taken into account.
The Dow Jones industrial average (down 37.57 to 10,595.93, Charts) and the Standard & Poor's 500 (down 4.69 to 1,231.67, Charts) index both lost about 0.4 percent. The Nasdaq composite (down 6.00 to 2,166.03, Charts) fell nearly 0.3 percent.
After the close, Texas Instruments (Research) boosted the high end of its profit range for the current quarter, citing stronger demand. Shares rose one percent in active extended-hours trading.
Fellow chipmaker Intel (Research) narrowed the range of its revenue forecast, but left the midpoint unchanged, saying business is basically meeting its expectations. Shares slipped one percent in after-the-bell trade.
Oil see-sawed back and forth throughout the regular session, falling after the weekly oil inventory report showed a smaller-than-expected drop in supplies of gasoline and other refined products after major disruptions from Hurricane Katrina.
But crude prices crept back up in the afternoon, amid continuing nervousness about supply and demand.
U.S. light crude oil for October delivery rose 12 cents to settle at $64.49 a barrel on the New York Mercantile Exchange. Crude fell as low as $63.10 right after the release of the report.
The moves were a sign that the market is overbought and may be due for a little pullback, said Tim Heekin, head of stock trading at Thomas Weisel Partners. "I think even if oil prices continue to fall for the next few days, we're probably going to see stocks continuing to pull back," he said.
Adding to the stock weakness was confusion about what move the Federal Reserve policy makers might make at the Sept. 20 meeting.
For a brief period, a number of market participants were betting that the combination of Katrina and higher energy prices would give the Fed reason to take a pause in its 14-month rate-hiking campaign.
But in the last few days, those bets have been thrown into question, due to speculation that the long-term economic damage from Katrina may not be as disastrous as had been initially thought.
Additionally, Chicago Fed president Michael Moskow implied in a Wednesday speech that the central bank is unlikely to stray from its mission of measured rate hikes, despite the impact of the hurricane, partly due to worries about rising inflation. (For more about the Fed and inflation, click here).
"You're getting a little bit of a setback after two up days, and a sense of people wanting to wait until they hear what the Fed has to say at the Sept. 20th meeting," said James Awad, chairman at Awad Asset Management.
On the move
Declines were pretty broad-based, with 24 out of 30 Dow components slipping.
Hovnanian Enterprises (down $4.10 to $57.49, Research), a luxury home builder, reported earnings late Wednesday that were short of forecasts. The company also forecast 2005 earnings that are in line with forecasts and 2006 earnings that are short of forecasts.
The earnings miss seemed to feed into fears about a bubble in the housing market, and gave investors an incentive to take profits on Hovnanian and the rest of the sector.
The Dow Jones Home Construction (down $21.85 to $989.12, Research) index slumped 2.2 percent, making it one of the worst performing sectors.
Sears Holding (down $7.04 to $127.81, Research) fell 5.2 percent after the retailer, which was bought by Kmart last March, reported higher profits as it phased out clearance sales. The strategy decreased revenue and led to a big drop in same-store sales at Sears.
Ford Motor (down $0.21 to $9.92, Research) could agree to sell its Hertz rental car unit as soon as Friday, the Wall Street Journal reported. The Journal said that a group of private investors may purchase the unit for up to $6 billion.
Ford shares lost around 2 percent.
eBay (down $1.53 to $38.93, Research) slipped 3.8 percent on a Wall Street Journal report that it is in talks to buy privately held Internet-telephone company Skype Technologies for $2 billion to $3 billion.
eBay weighed on the broader Internet sector, dragging the Goldman Sachs Internet (Charts) index down more than 1 percent.
Protecting the Nasdaq was the chip sector, which rose on optimism ahead of the mid-quarter updates from Texas Instruments and Intel.
Also helping: National Semiconductor (up $1.44 to $26.05, Research), which reported higher-than-expected fiscal first-quarter earnings and revenue and boosted its revenue forecast for the current quarter.
The Philadelphia Semiconductor (up 5.41 to 478.81, Charts) index, or the SOX, rose 1.1 percent.
Market breadth was negative. On the New York Stock Exchange, losers topped winners three to two on volume of 1.44 billion shares. On the Nasdaq, decliners beat advancers by three to two as 1.61 billion shares changed hands.
Job claims fall, inventories dip
In the morning's economic news, jobless claims fell by 1,000 last week to around 319,000, the Labor Department reported. That was short of forecasts for a drop to 315,000. However, the number of new claims is expected to be revised up in the weeks ahead as Gulf Coast states process more unemployment claims.
A separate report showed that wholesale inventories slipped 0.1 percent in July after rising 0.7 percent in June. Economists surveyed by Briefing.com expected inventories to have climbed 0.6 percent.
Treasuries were little changed, with the yield on the 10-year note holding at 4.14 percent, unchanged from late Wednesday. Treasury prices and yields move in opposite directions.
The dollar rose versus the euro and the yen.
COMEX gold climbed $1.70 to settle at $450.70 an ounce.