Stocks set for another bumpy ride

NEW YORK (CNNMoney.com) -- New worries about problems in mortgage and housing markets and a continued decline in the dollar could hit stocks Thursday as stronger-than-expected sales from retailers weren't enough to cheer investors.

About an hour before the start of trading, Nasdaq and S&P futures were lower, indicating a negative open for stocks. A better-than-expected sales report from Wal-Mart Stores (WMT, Fortune 500) had briefly lifted futures earlier, but the gains quickly evaporated.

No. 1 retailer Wal-Mart Stores posted a 2.6% gain in its February U.S. sales at stores open at least a year, excluding gasoline sales. That closely watched retail measure is known as same-store sales. On that measure, Wal-Mart's sales easily beat forecasts from sales tracker Thomson First Call for only a 1.1% sales gain, and also beat the top end of its guidance, which had been for sales to be flat to up 2%.

Analysts had also been looking for modest sales gains from other major retailers. As a group, retailers had been expected to post a 1.3% gain in same-store sales, although early results showed several retailers beating forecasts. The strong reports were a stark contrast to very weak January sales, which had helped to spark recession fears.

The dollar fell to a record low against the euro in early trading. The European Central Bank and Bank of England both left rates unchanged, as had been widely expected. When coupled with the current policy of rate cuts from the Federal Reserve, those central banks' lack of movement is putting pressure on the dollar.

The weaker dollar is also helping to lift oil prices once again. A barrel of light sweet crude rose 49 cents to $105.01 a barrel, down slightly from a record trading high of $105.96 touched earlier in Asian electronic trading.

Problems in the mortgage markets were in the news again as Thornburg Mortgage (TMA) said late Wednesday that it was notified by JP Morgan Chase (JPM, Fortune 500) that is was in default on a $320 million financing agreement after missing a $28 million margin call. That default notice triggered more defaults for Thornburg's other lending agreements. Thornburg shares plunged 50% in pre-market trading.

Carlyle Capital, a unit of private equity firm The Carlyle Group, also announced that it had failed to meet margin calls on its $21.7 billion portfolio of mortgage-backed securities. It said it had received a notice of default from one of the banks, and expected more default notices. Its lenders as of Dec. 31, according to filings, included top U.S. and European investment banks.

Merrill Lynch (MER, Fortune 500) announced it would stop originating mortgages from First Franklin, one of the nation's top subprime mortgage lenders which it bought for $1.3 billion less than two years ago. The investment bank also said it is looking at selling the mortgage servicing unit of First Franklin. About 650 people will lose their jobs as a result of the decision.

On the economic front, the government will report on weekly jobless claims at 8:30 a.m. A report from payroll services firm ADP Wednesday that showed a decline in private sector employment fed into growing concerns about the February jobs report, which the Labor Department is due to release early Friday. Economists surveyed by Briefing.com are forecasting a modest gain of 25,000 jobs, with the unemployment rate rising to 5%.

At 10 a.m. the National Association of Realtors is due to release its pending home sales report for January, as well as an update on its economic and sales forecast for the year. Both are likely to show further weakness in the already battered home market.

Overseas markets were mixed. Asian stocks finished higher. European shares fell in midday trading.

In other corporate news, investor Carl Icahn, who has been steadily increasing his position in Motorola (MOT, Fortune 500), disclosed in a filing that he now owns 6.3% of the mobile phone company, up from 5% a month ago. Icahn is waging his second proxy battle in the last two years at Motorola.

Late Wednesday tax service H&R Block (HRB, Fortune 500) posted earnings from continuing operations, excluding items, that beat forecasts. Digital video recorder firm Tivo (TIVO) also topped forecasts with a smaller-than-expected loss.