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Stocks slip even as unemployment claims drop

NEW YORK CITY — Investors snapped a recent trend Thursday when they sold stocks after the latest signs on the economy continued to show modest growth.

The Dow Jones industrial average fell about 13 points in morning trading. Broader indexes also fell modestly.

The Labor Department said first-time claims for unemployment benefits fell to a two-month low, but still remain at levels that indicate economic growth is sluggish. Claims dropped to 450,000 last week. Economists polled by Thomson Reuters forecast they would rise to 460,000.

In recent weeks, reports that topped forecasts were enough to rally the market as investors’ worries about the economy falling back into recession dissipated. But the economy remains weak and stocks are approaching the high end of their recent trading range, which could be putting a lid on the market’s September rally.

“We really don’t have any economic trend in place other than stumbling economic growth,” said Brett Gallagher, deputy chief investment officer at Artio Global Investors. “The reality is we’re in for a lengthy slog of below-trend growth.”

A separate report Thursday indicated prices at the wholesale level rose more than expected last month, but analysts say inflation isn’t necessarily a short-term worry. The Producer Price Index, which measures prices on goods before they reach consumers, rose 0.4 percent in August because of rising energy costs. Economists were expecting a smaller increase.

The Dow fell 12.67, or 0.1 percent, to 10,559.83 in morning trading.

The Standard & Poor’s 500 index fell 2.57, or 0.2 percent, to 1,122.50, while the Nasdaq composite index fell 1.64, or 0.1 percent, to 2,299.68.

The S&P 500 is approaching a key technical level, which could be providing resistance. Over the past few days it has approached 1,131, a level it has not touched since June. Technical levels are considered very important, particularly because electronic trading is so prevalent now. Traders often use technical indicators to set automatic buy or sell orders, so traders uncertain about the health of the economy might set sell orders for around that level to lock in profits from the market’s recent rally.

“In a world where there’s no clear direction, technicals have more influence on trading,” Gallagher said. The S&P is approaching the high end of its recent trading range, which could be putting a cap on the rally, he said.

The S&P 500 has gained 7.2 percent in September, which has been a historically poor month for stocks. The Dow has jumped in nine of the past 11 days, sending the index up more than 5.5 percent.

Stocks rallied Wednesday after a report on industrial production showed the manufacturing continued to expand in August. Traders overcame early disappointment from a report on New York manufacturing activity to send stocks higher.

A similar regional report on the Mid-Atlantic region Thursday showed contraction for the second straight month in September, though the Philadelphia Fed manufacturing index improved from August.

In corporate news, FedEx Corp. said its fiscal first-quarter earnings doubled, but the company plans to cut 1,700 jobs as it consolidates its trucking operations to save money. The company also raised its quarterly earnings outlook, but the forecast was still shy of analysts expectations.

Shares fell $2.26, or 2.6 percent, to $83.68.

About three stocks fell for every two that rose on the New York Stock Exchange where volume came to 121.7 million shares. Volume has been light throughout the recent rally, a further indication that not all traders are convinced about the strength of the market.

Meanwhile, bond prices dipped slightly. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.76 percent from 2.72 percent late Wednesday. Its yield is used to help set interest rates on mortgages and other consumer loans.

Overseas markets slipped as well. Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index fell 0.1 percent, and France’s CAC-40 fell 0.4 percent. Japan’s Nikkei stock average fell 0.1 percent a day after it surged more than 2 percent as the country’s government stepped in to weaken the currency.

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