The Dow and S&P 500 lost ground on Thursday as some investors fretted about the quality of bank earnings, which weighed on financial shares, and after a report that IBM was not interested in further negotiations with Sun Microsystems Inc.

Shares of homebuilders <.DJUSHB> fell after data showed housing starts slumped sharply in March, signaling the economy is still gripped by the recession.

Shares of JPMorgan Chase & Co rose following better-than-expected results but unease about the future prospects of the entire sector lingered.

Shares of Sun Microsystems turned negative following the report, while IBM was among the biggest boosts on the Dow, up 2 percent.

The Dow Jones industrial average <.DJI> added 32.25 points, or 0.40 percent, to 8,061.87. The Standard & Poor's 500 Index <.SPX> put on 4.46 points, or 0.52 percent, to 856.52. The Nasdaq Composite Index <.IXIC> was up 16.90 points, or 1.04 percent, at 1,643.70.

(Reporting by Leah Schnurr; Editing by Theodore d'Afflisio)