U.S. Stocks Mixed In Volatile Trading

NEW YORK (MarketWatch) -- U.S. stocks were mixed in volatile trading Thursday, as the market remained jittery ahead of Federal Reserve Chairman Ben Bernanke's speech tomorrow, with Wal-Mart Stores leading the Dow lower after the retailer's shares were cut to sell by Merrill Lynch.

"We've got Ben Bernanke talking tomorrow so the market is just a little nervous about what he might say," Marc Pado, U.S. market strategist at Cantor Fitzgerald. "The weakness this morning is not really heavy selling considering the volatility we've seen of late."

"The market wants and expects a rate cut at the Sept. 18 [Federal Reserve] meeting," Pado said. "What they want to hear is Bernanke make comments that clearly indicate that the Fed is going to act. Anything less than that is going to be negative for the market."

The Dow Jones Industrial Average fell 18 points at 13,270, with 18 of its 30 components in negative territory. The Dow hit an intraday low of 13,184 earlier in the session.

Leading the Dow's declines, shares of Wal-Mart fell 1.4% after Merrill Lynch cut them to sell, citing margin erosion at the company's core U.S. division.

The S&P 500 index fell 2 points at 1,461 points.

More than 500 million shares exchanged hands on the New York Stock Exchange, with gainers outpacing decliners 17 to 13. On the Nasdaq, 770 million shares were traded, with gainers outpacing decliners 15 to 11.

Tech gains

The technology-laden Nasdaq Composite rose 12 points at 2,575.

"Technology, when you look at the whole subprime mess, it doesn't have any direct exposure to that," Pado said. "Within the GDP revision was a big upgrade of business spending [in technology]. Housing was revised down. That's probably the main reason why tech is doing so well today."

The U.S. economy bounced back in the second quarter, growing at a 4% annual real growth rate, the Commerce Department reported Thursday. The upward revision to GDP was largely due to an improved trade balance and to the biggest increase in investments in commercial buildings in 26 years.

Shares of International Business Machines rose 1%, Intel Corp. was up 1.5% and Hewlett-Packard Co. gained 1%.

Shares of Dell Inc. rose 2% ahead of the No. 2 PC company's second-quarter earnings report, due after the market closes. Analysts surveyed by Thomson Financial estimate Dell will earn 30 cents a share on $14.6 billion in revenue for the quarter.

On Wednesday, U.S. stocks rallied, boosted by strong gains in technology and energy shares as well as particularly light trading volume, with the Dow surging nearly 250 points. In contrast, the Dow tumbled 280 points Tuesday.

Waiting for Bernanke

Investors are awaiting Federal Reserve Chairman Ben Bernanke's address Friday to the annual Fed conference in Jackson Hole, Wyo.

"Bernanke will say what he's been saying -- that the economy is not heading for negative growth," said Peter Cardillo, chief market economist at Avalon Partners. "He's going to obviously repeat what the FOMC statement indicated and his recent letter to Sen. Schumer said that if need be the Fed will cut interest rates. He'll probably highlight the fact that the Fed has taken action in terms of the credit crunch crisis by injecting liquidity and by cutting the discount rate."

"He's going to once again reiterate that the Fed's purpose is not to bail out sour speculative bets," Cardillo said.

Bernanke has reiterated that the Federal Reserve is closely monitoring markets and is ready to act if necessary. In a letter to Sen. Charles Schumer, D-N.Y., dated Aug. 27 and released Wednesday, Bernanke said Fannie Mae , Freddie Mac and the Federal Housing Administration should provide more assistance to subprime borrowers if they are able to.

Stocks in focus

Financial shares were broadly lower after analysts at Lehman Brothers lowered their forecasts for he second half of this year and 2008 for Bear Stearns Cos. , Goldman Sachs Group Inc. , Merrill Lynch & Co. and Morgan Stanley .

Shares of H&R Block Inc. fell 1.7% after the Kansas City, Mo., provider of tax-preparation services, reported a wider fiscal first-quarter loss and said it's discussing changes to its agreement to sell Option One Mortgage Corp. to the private-equity firm Cerberus Capital Management.

Shares of mortgage giant Freddie Mac tumbled 3.4% after the company said Thursday that its second quarter net income slipped 45% primarily due to a higher provision for credit losses and mark-to-market losses on credit-related items.

Mobile phone maker Motorola Inc. surged 3% after Lehman Brothers upgraded it to overweight from equal weight, saying it expects rising production in the third quarter to signal a recovery in the group's phone unit.

Shares of Tiffany & Co. rose 1%. Its fiscal second-quarter net income fell 10% to $37 million, or 26 cents a share, from $41.1 million, or 29 cents a share, a year earlier.

Economic data

First-time claims for state unemployment benefits crept up in the latest week, hitting a high last seen in mid-April and signaling some weakening in the nation's labor market.

Including a revision to the prior week's claims data, initial claims have now risen for five straight weeks, according to a report from the Labor Department issued Thursday. Claims for the week ended Aug. 25 rose by 9,000 to 334,000, the highest since April 14.

Other markets

The dollar traded mixed against its major rivals, but was unmoved by data show strong revised GDP and August employment data.

On the New York Mercantile Exchange, gold futures edged lower.

Crude-oil futures skewed lower as traders locked in some of the previous session's advance, but a slowdown in imports from Mexico following Hurricane Dean and strong gasoline prices continued to buoy the market.

Treasurys were higher Thursday, sending yields lower, with yields on short-term bills remaining under pressure amid continued funding and credit concerns and speculation about Friday's speech by Bernanke.

By Polya Lesova