Stock prices finished mixed Thursday despite further evidence that housing and credit woes were hurting the economy.
The Dow Jones industrial average fell as much as 60 points early in the session after disappointing results from Bank of America, but rebounded as bargain hunters bet that Thursday's dismal data could persuade the Federal Reserve to lower interest rates again.
Still, investors remained spooked after BofA -- considered a bellwether for the banking industry because it has branches across the country -- said "significant dislocations" in the capital markets pulled its third-quarter earnings down 32%. Similar results were reported by Washington Mutual late Wednesday and by Citigroup on Monday.
Treasury yields tumbled and the dollar dropped to a new low against the euro after the Labor Department said the number of newly laid-off workers filing claims for unemployment benefits shot up last week by the largest amount since February. The report was much worse than economists had expected, and signaled that the labor market could be starting to weaken from a downturn in housing and the global credit turmoil.
"There are so many factors going on right now between the dollar getting crushed, oil moving higher, and news out of the banking sector," said Greg Church, chief investment officer of Church Capital Management in Yardley, Pa. "Yet, it is amazing to me that this market continues to lift its head. The market came back somewhat because there's that whole camp that thinks any bad news is good news that the Fed will lower rates."
The Dow inched down 3.58 points to 13,888.96.
Broader indexes finished mixed. The Standard & Poor's index fell 1.16 points, or 0.1%, to 1,540.08, while the technology-heavy Nasdaq composite index added 6.64 points, or 0.2%, to 2,799.31. The Russell 2000 index of smaller companies edged up 0.14 of a point to 825.03.
Declining issues led advancers by a thin margin on the New York Stock Exchange.
The yield on the benchmark 10-year Treasury note fell to 4.49% from 4.55% late Wednesday.
Yields on short-term government debt continued to slide.
The yield on the three-month Treasury bill sank to 3.85%, down from 4% late Wednesday. Monday it was at 4.28%.
The 6-month bill closed Thursday at 4.1%, down from 4.17% on Wednesday.
In another economic report Thursday, the Federal Reserve Bank of Philadelphia said its October manufacturing index came in weaker than expected, suggesting a slowdown in growth for the region.
Sluggish economic data could motivate the Fed, which cut its benchmark interest rate a half-point last month, to undertake another reduction at its Oct. 30-31 meeting.
Oil prices continued their advance amid further tensions between Turkey and Kurdish rebels in northern Iraq. Crude futures rose $2.07 to a record $89.47 a barrel on the New York Mercantile Exchange.
The disappointing bank results made some investors wary about profit reports yet to arrive.
"Washington Mutual and Bank of America's announcements remind people that there is a housing issue out there, and that it's tough to analyze how bad it can get before it gets better," said John C. Forelli, portfolio manager at Independence Investment.
Bank of America shares fell $1.18, or 2.4%, to $48.85.
Washington Mutual sank $2.55, or 7.7%, to $30.52 after it reported quarterly profit plunged 72%. The stock touched a 52-week low of $30; its previous low was $31.27.
E-Trade Financial tumbled $1, or 8%, to $11.47. The discount brokerage late Wednesday reported an unexpected loss because of its exposure to credit markets.
Technology could be a bright spot today. After Thursday's closing bell, Google posted a 46% jump in its third-quarter profit, topping the elevated expectations that have pushed up the Internet giant's stock price by more than $100 during the last month. Google, which ended the regular session up $6.14 at $639.62, rose in heavy after-hours trading.
In foreign trading, the Indian market plunged for a second day on worries that securities regulators wanted to restrict some stock purchases by foreigners. Regulators on Tuesday proposed curbs on certain derivative securities that allow foreigners to anonymously buy in to the market.
The Sensex stock index in Mumbai slid 3.8% after losing 1.8% on Wednesday. The index had hit a record high Monday.
Other emerging markets were mixed. The Shanghai composite index fell 3.5% and Brazil's Bovespa index edged up 0.1%.
Elsewhere overseas, key stock indexes fell 1% in Britain, 0.8% in Germany and 0.9% in France. Japanese shares closed up 0.9%.
In other market highlights:
* U.S.-traded shares of Logitech International soared $6.77, or 23%, to $36.26 after the Switzerland-based computer mouse maker reported better-than-expected earnings and raised its forecast for the year.
* U.S.-traded shares of Aspreva Pharmaceuticals leaped $3.11, or 14%, to $25.61. The Canadian drug maker agreed to be acquired by Galenica Holding, Switzerland's largest drug wholesaler, for $915 million.