U.S. stocks edged lower on Thursday as China inflation data raised worries about reduced demand from one of the world's largest economies, but gains in big-cap technology shares limited losses.

Shares of industrial and materials companies, linked to economic growth, fell as Chinese inflation spurted to a 16-month high and provided fresh arguments for monetary tightening to keep the economy from overheating.

An index of U.S. industrial shares <.GSPI> was down 0.4 percent.

Technology shares see-sawed after five straight winning sessions, with Oracle Corp up nearly 1 percent to $25.06. Financial companies bailed out by the government also added to recent gains. Citigroup Inc rose 2.5 percent at $4.06.

You started off this morning with some hesitation and (concern about) China overheating. But it's being counterweighted by feelings the financial sector here is healing, said Jim Awad, managing director at Zephyr Management in New York.

The Dow Jones industrial average <.DJI> was down 3.02 points, or 0.03 percent, at 10,564.31. The Standard & Poor's 500 Index <.SPX> fell 1.27 points, or 0.11 percent, at 1,144.34. The Nasdaq Composite Index <.IXIC> dipped 0.59 points, or 0.03 percent, at 2,358.36.

Stocks barely reacted after data showed initial jobless claims dropped by 6,000 to 462,000 in the latest week. Economists pegged the number at 460,000.

The U.S. trade deficit narrowed unexpectedly as oil imports fell to their lowest since February 1999.

Among the top drags on the Dow was manufacturer 3M , down 1 percent at $80.72.

On Nasdaq, shares of Hologic Inc jumped 6.1 percent to $18.61 and hit an 18-month high after talk that Philips Electronics NV
may want to buy the medical diagnostics company, traders in London and New York said. A Philips spokesman in Amsterdam declined to comment.

In other corporate news, BP Plc agreed to buy Brazilian, Azeri and Gulf of Mexico fields from Devon Energy Corp for $7 billion. Devon shares rose 1.3 percent to $72.60.

(Editing by Jeffrey Benkoe)