Global stocks fell and government debt rose on Thursday despite solid demand for Spanish bonds as investors remained skeptical about the fiscal soundness of the euro zone and softer-than-expected U.S. economic data damped sentiment.
The pace of factory activity in the U.S. mid-Atlantic region waned in April for the first time in five months, as gauged by the Philadelphia Federal Reserve. The government said the number of Americans claiming unemployment benefits for the first time fell only slightly last week, dampening hopes for a stronger economy.
We have had a pretty poor round of economic data here. Philly Fed is the second major manufacturing data that has slipped, which is potentially an ominous sign for manufacturing, said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.
The Dow Jones industrial average was down 30.66 points, or 0.24 percent, at 13,002.09. The Standard & Poor's 500 Index was down 1.81 points, or 0.13 percent, at 1,383.33. The Nasdaq Composite Index was up 7.47 points, or 0.25 percent, at 3,038.92.
In Europe, equity markets extended losses after the weaker-than-expected U.S. economic data.
The pan-European FTSEurofirst 300 was down 0.2 percent at 1,043.97 points. The euro zone-only Euro STOXX 50 fell 1.5 percent to 2,292.95.
The euro tracked a rise in credit default swaps and a widening of yield spreads between safe-haven German bunds and debt issued by weaker countries like Spain and Italy in the euro zone. The yield gap suggested growing nervousness about liquidity in the financial system and sustainability of the region's debt.
This is all emblematic of the fact that the market remains very nervous about the state of credit in the euro zone, said Boris Schlossberg, director of FX research at GFT Forex in Jersey City.
Despite the fact that we had a decent Spanish bond auction, there is just basic skepticism not only about the sovereign debt market but also the health of the overall banking system, particularly in Spain.
Spain's Treasury issued 2.5 billion euros in two- and 10-year bonds, at the top end of the targeted amount. Yields on the key 10-year bond were higher, however, reflecting fears that Spain may miss budget deficit targets and about its banking sector.
The euro rebounded after ealier declines, gaining 0.2 percent to $1.314. The dollar was down against a basket of major trading-partner currencies, with the U.S. Dollar Index down 0.05 percent at 79.499.
New claims for unemployment benefits in the United States fell last week, but from an upwardly revised number a week earlier, the U.S. government said on Thursday, leaving new claims at 386,000, above the Reuters consensus forecast of 370,000.
The data could dim hopes of a pick-up in job creation in April after last month's slowdown, but employment growth is unlikely to sharply retreat like last year, said Alan Levenson, chief economist at T. Rowe Price in Baltimore.
We're seeing a step-wise improvement even if we do get some similarities in the pattern between last year and this year, the pullback in employment growth is going to be more gentle, said Levenson. We've not sustained the shocks this year that would prompt the kind of prolonged deceleration we had last year.
U.S. Treasuries' prices rose on after the higher-than-forecast new U.S. jobless claims appeared to fortify prospects for accommodative monetary policy in the months ahead.
The benchmark 10-year note rose 5/32 on the news, its yield easing to 1.96 percent.
Crude oil bounced off a two-month low set the previous session after the Spanish bond auction.
Brent June crude gained 63 cents to $118.60 a barrel.
U.S. May crude fell 20 cents to $102.47 a barrel.