Rally hits a roadblock
Investors step back after boosting the S&P 500 by 17% in seven sessions.
The Fixers
NEW YORK (CNNMoney.com) -- Stocks slipped Thursday as rising oil and gold prices, a weaker dollar and more dour reads on the economy gave investors a reason to step back after the recent rally.
The Dow Jones industrial average (INDU) lost 86 points, or 1.2%. The S&P 500 (SPX) index fell 10 points, or 1.3%. The Nasdaq composite (COMP) lost almost 8 points or 0.5%.
After rallying 17% in seven sessions, the S&P 500 and the broader market were vulnerable to a bit of a pullback Thursday. Weak economic reports and a selloff in bank stocks led the declines.
"I think it's a classic bear market rally and we're near the top of it," said Tom Hepner, vice president and investment advisor at Ruggie Wealth Management. "That having been said, we are in a bottoming-out process."
Stocks are likely to remain rangebound for the rest of the first half, he said, particularly as investors sort through the first-quarter earnings reports, which begin landing in April. In the second half, stocks could then start a slow climb higher through year-end, he said, "assuming that investors get confidence-building information about the economy."
Autos and auto parts makers gained after Treasury said it is providing a $5 billion bailout of auto suppliers, which have been hit hard by the slump in the automaker industry. GM (GM, Fortune 500) jumped 8.7% on the news. Parts makers American Axle (AXL), Lear (LEA, Fortune 500) and ArvinMeritor (ARM, Fortune 500) gained as well.
The markets gained Wednesday after the Fed said it was buying $300 billion in long-term bonds over the next six months as part of a larger initiative to put $1 trillion into the economy and get credit flowing again.
Friday brings little in the way of economic news or earnings reports. On tap: Fed Chairman Ben Bernanke speaks in Phoenix on the financial crisis and community banking.
Financials: The banking sector remained in focus as the House of Representatives voted to impose a steep tax on large employee bonuses at firms that accepted government bailout money.
The bill was hatched in the wake of the public outcry after AIG (AIG, Fortune 500) paid out $165 million in bonuses to top executives after accepting more than $170 billion in taxpayer-funded help. AIG shares jumped 17%.
In an interview with CNN, Treasury Secretary Timothy Geithner said his department was responsible for a provision in the $787 billion stimulus package that allowed AIG to award bonuses.
Citigroup (C, Fortune 500) said Thursday it was pursuing a reverse stock split to help counter the conversion of the government's big preferred share stake into common stock. After initially rallying over 20%, shares turned lower.
Other bank shares retreated too, including Bank of America (BAC, Fortune 500), Morgan Stanley (MS, Fortune 500), and Wells Fargo (WFC, Fortune 500).
The banking sector, as measured by the KBW Bank index (BKX), rallied 52% through Wednesday's close after ending at multi-year lows two weeks ago.
On Thursday, the KBW lost 9%.
Company news: Oracle (ORCL, Fortune 500) reported higher fiscal third-quarter earnings and a smaller-than-expected drop in sales late Wednesday. The business software maker also declared its first quarterly dividend. Shares jumped 9.7%.
FedEx (FDX, Fortune 500) reported weaker-than-expected third quarter results and also said it will cut back spending by about $1 billion each year.
Market breadth was negative. On the New York Stock Exchange, losers barely edged winners on volume of 1.95 billion shares. On the Nasdaq, decliners beat advancers seven to six on volume of 2.36 billion shares.
Economy: The number of Americans filing new claims for unemployment fell last week to 646,000 from a revised 658,000 the prior week. Economists surveyed by Briefing.com thought claims would fall to 655,000.
However, the number of Americans continuing to receive unemployment benefits rose to a record 5.473 million.
The Philadelphia Fed index, a regional reading on manufacturing, improved to negative 35 in March from negative 41.3 in February, but the number indicated the economy remains deep in recession. Economists surveyed by Briefing.com though it would improve to negative 39.
The index of leading economic indicators fell 0.4% in February, short of expectations for a drop of 0.6%. LEI rose a revised 0.1% in the previous month.
Bear market rally: Stocks rose for six out of seven sessions, with the S&P 500 rising 17% through Wednesday's close. After that run, stocks pulled back a bit Thursday.
In part, the advance has been a bounce off the recent lows, after the S&P 500 slumped 28% in two months, falling to a 12-1/2 year low. But in addition, investors have been glomming on to a few signs of stabilization, such as Tuesday's housing report and last week's February retail sales report.
The financial sector has strengthened after Citigroup and a few other banks said that they were profitable in the first two months of the year. Also, regulators talked about reinstating the "uptick rule" that limits short selling and changing mark-to-market accounting.
Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.60% from 2.54% Wednesday. Treasury prices and yields move in opposite directions.
Lending rates were improved. The 3-month Libor rate fell to 1.23% from 1.29% Wednesday, while the overnight Libor rate dipped to 0.3% from 0.31%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian markets ended mixed and European markets ended higher.
In currency trading, the dollar fell versus the euro and the yen.
U.S. light crude oil for April delivery settled up $3.47 to $51.61 a barrel.
COMEX gold for April delivery rose $69.70 to settle at $958.80 an ounce. 
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