US stocks: Prices fall as Amazon, productivity data weigh

NEW YORK - US stocks broke a three-day rally and slid lower on Thursday, weighed down by a report that showed US productivity growth slowed in the fourth quarter and a sharp fall in online retailer Amazon.com Inc. that dragged on tech stocks.

The weaker-than-expected rise in productivity caused concern about higher inflation and a possible speed-up in interest-rate hikes by the Federal Reserve.

Amazon.com fell 16.4 per cent, a day after the online retailer's results disappointed Wall Street.

The Dow Jones industrial average was down 3.69 points, or 0.03 per cent, at 10,593.10. The Standard & Poor's 500 Index was down 3.30 points, or 0.28 per cent, at 1,189.89. The Nasdaq Composite Index was down 17.42 points, or 0.84 per cent, at 2,057.64.

Trading was active, with 1.5 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.9 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Decliners outnumbered advancers on the New York Stock Exchange by about 6 to 5 and by 3 to 2 on Nasdaq.

Thursday's decline came after all three indexes had risen for three sessions in a row.

The market was also pausing before closely watched data on job creation by employers for January, scheduled to be announced early on Friday, traders said.

"We had a pretty decent bounce, and I think the rally's run into a little bit of resistance," said John Hughes, managing director at Epiphany Equity Research. "The employment number is tomorrow and I think that's why people are a bit hesitant. "

Other data from the Labor Department said nonfarm business productivity, or worker output per hour, grew at an annual rate of just 0.8 per cent in the fourth quarter -- the smallest advance since a drop in the first quarter of 2001.

In a separate report, the department said initial claims for state unemployment benefits fell to 316,000 last week, matching a figure reached seven weeks ago as the second lowest since before the economy tipped into recession in 2001.

In a third report, the Institute for Supply Management said its nonmanufacturing index, which measures activity in the services sector, slid to 59.2 from a revised 63.9 in December.

"There were concerns over the productivity data while the ISM was a bit weaker than expected -- so they were a catalyst today," said Hughes.

A brokerage downgrade of Starbucks Corp. also weighed on the Nasdaq. Starbucks fell 8.2 per cent, or US$4.43 to US$49.57 after Smith Barney cut its rating on the coffee shop company, citing lower-than-expected same-store sales growth in January.

Amazon fell US$6.13 to US$35.75.

"The story is that the Nasdaq is the albatross around the neck of the market right now," said Paul Cherney, chief market analyst at Standard & Poor's. "Tech stocks continue to disappoint," he said, citing Amazon.

Even talk about another potential merger failed to boost the overall market. MCI Inc., the long-distance telephone and data services company, rose 2.4 per cent, or 47 cents to US$20.15 after sources familiar with the situation said Qwest Communications International Inc. offered to acquire MCI for more than US$6 billion. Qwest was up 4.8 per cent, or 20 cents at US$4.40.

Among stocks gaining was Hewlett-Packard Co., which rose 1.6 per cent, or 33 cents to US$19.90, after Lehman Brothers on Thursday raised its rating on HP to "overweight" from "equal weight. "

Mercury Interactive Corp. rose 10.7 per cent, or US$4.74 to US$48.94 after Wachovia Securities raised its rating to "outperform" from "market perform" after the US-Israeli software maker reported a strong fourth-quarter.

- REUTERS