"The market seems to be holding up relatively well, especially after yesterday's rally," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "I was a little surprised not to see more follow through after IBM's strong earnings, but that announcement got the wind sucked out of its sails by Nokia."
The market didn't get any relief from the freshest snapshot of the weakening U.S. labor market, as well as weakening business conditions in the Philadelphia region.
The Dow Jones Industrial Average was off 5 points at 12,616, with 16 of its 30 components losing ground.
Pfizer , a Dow component, slipped 4% as the drug-making giant said its profit dropped 19% but held onto its profit guidance for the year.
Financial shares on the Dow turned higher, with Bank of America JP Morgan Chase recouping earlier losses, even as Merrill Lynch fell 4.1% after saying it swung to a quarterly loss of $1.96 billion and would cut 4,000 jobs.
The Merrill loss, Pavlik said, was no surprise to the market.
Another Dow component, IBM , rose 2.2% after the technology giant recorded a 26% profit rise, topping analyst forecasts, and upped its 2008 forecast.
"IBM beat revenue and earnings expectations substantially with strength across the board," said American Technology Research Analyst Shaw Wu. "We find this quite impressive in light of the tough economic environment."
However, technology shares weighed down the broad market, along with the industrials sector. Energy and material stocks also gave back some of Wednesday's gains, as a firmer dollar pressured commodities prices.
The S&P 500 index was down 1.6 points to 1,363, and the Nasdaq Composite lost 12 points to 2,337.
Crude oil futures fell back below $115 a barrel, after hitting a record high at $115.54 overnight. Likewise, gold fell $5.40 to $942.90 an ounce.
Trading volumes showed 857 million shares exchanging hands on the New York Stock Exchange, where decliners topped gainers 8 to 7. There were 520 million shares trading on the Nasdaq stock market, and decliners there topped gainers by 8 to 5.
Nokia, which makes technology for telecom equipment firms along with its own phones, weighed on the tech sector. Its shares slumped 14.7% after the mobile phone giant reported a 25% profit rise, but lowered its forecast for mobile device sales by value this year.
Online auctioneer eBay slumped 4.4%. The firm posted a strong increase in its bottom line, but its core auction business continued to show weakness.
Google fell 1% ahead of its earnings after the close Thursday. Oppenheimer analyst Jason Helfstein said Google's management, while not providing financial guidance, has sent signals that it hasn't been affected by the economic slowdown.
But "to the extent this quarter disappoints, or the company's tone changes, we see less investor support," he said.
Separately, The Wall Street Journal reported Yahoo was closer to outsourcing search advertising to Google after a positive initial test.
The market failed to get much relief from the latest batch of economic data.
Jobless claims rose by 17,000 to 372,000 in the latest week, more or less in line with market expectations, the Labor Department said.
And stocks briefly slumped after a survey of business conditions in the Philadelphia region came in weaker than expected. The Philadelphia Federal Reserve index remained negative for the fifth straight month, dipping to negative 24.9 in April from negative 17.4 in March. It's the lowest since February 2001. Readings below zero indicate more firms say conditions are worsening than say things areimproving.
Pause after the rally
U.S. stocks had rallied Wednesday as results and outlooks from Intel Corp., J.P. Morgan Chase and others helped boost confidence in earnings season, while resource stocks were helped by commodities strength. The Dow Jones Industrial Average finished with a gain of 256 points, the Nasdaq Composite added 64 points and the S&P 500 rose 30 points.
Coming economic data include the Philadelphia Federal Reserve index for April and leading indicators from March, as well as speeches from Federal Reserve Vice Chairman Donald Kohn, Dallas Fed President Richard Fisher and Richmond Fed President Jeffrey Lacker.
The dollar climbed against the Japanese yen, while oil futures slipped slightly to $114.85 a barrel.
The Nikkei 225 closed 1.9% higher in Tokyo. The FTSE 100 was down in afternoon trade.
By Nick Godt