Wall Street Starts Lower After Two Days Of Gains

NEW YORK (MarketWatch) -- U.S. stocks open lower Thursday, as Wall Street bypassed better-than-expected figures on the employment front to step back from two sessions of solid gains inspired by the Federal Reserve's interest-rate cut.

Stock futures were lower early on but scaled back their losses after the release of fresh weekly data showing a drop in on first-time claims for unemployment insurance.

"The data continue to suggest that the labor market is much healthier than the August payroll reading would suggest," Lehman Brothers analyst Drew Matus wrote in an early note.

The Dow Jones Industrial Average was off 32.2 points at 13,783.4.

The S&P 500 was off 4.08 points at 1,524.95 and the Nasdaq Composite fell 8.64 points at 2,657.84.

On Wednesday, U.S. stocks closed higher, extending the prior day's rally in cheering the Fed's surprise move to slash interest rates by fully half a percentage point.

Thursday's session has the Fed back in focus, with central bank chief Ben Bernanke testifying along with Treasury Secretary Henry Paulson before a House panel on the embattled mortgage markets.

Later, data on wholesale inventories and a Philadelphia-area manufacturing survey are due.

In foreign exchange, the euro broke through the $1.40 level for the first time ever, and the dollar also was weaker against Japan's yen and the British pound.

Amid the dollar's weakness, gold futures continued their ascent, up more than 1% on top of their recent rally. .

In energy, November-dated oil futures eased 16 cents at $80.69 a barrel.

The brokerage sector was again in the spotlight after Lehman Brothers and Morgan Stanley kicked off quarterly financial results with mixed results on Tuesday and Wednesday, respectively.

On Thursday, results came in mixed: Goldman Sachs Group reported a 79% profit rise for the third quarter, but Bear Stearns saw its quarter results fall short of expectations. Bear Stearns also announced plans for stock repurchases.

Meanwhile, package-delivery firm FedEx lowered its full-year earnings outlook, citing worries about the strength of the economy.

Also on the earnings front, Palm Inc. forecast current-quarter revenue in line with estimates. Oracle Corp. is slated to report results after the close.

Shares of Nasdaq Stock Market are also likely to be active after striking a multifaceted deal with Borse Dubai involving equity interests in the London Stock Exchange and Scandinavian bourse operator OMX. A Qatari investment fund, however, is threatening to scotch the deal. .

Overseas markets were mixed, with the Nikkei 225 tacking on 0.2% while the FTSE 100 slipped 0.8% in London.

By Kate Gibson