Stocks slip, a day after biggest rally in 2 years

NEW YORK (AP) ? Stocks edged lower in morning trading Thursday, a day after the market had its best day in two and a half years. Bank stocks and materials makers fell the most.

Another rise in applications for weekly unemployment benefits set a negative tone for the markets. The Labor Department said initial applications rose to 402,000 last week. The increase means that layoffs are rising slightly.

The government’s monthly labor report comes out Friday. Economists forecast that the unemployment rate will remain at 9 percent.

Traders got little encouragement from a report from the Institute for Supply Management that manufacturing grew last month at the fastest pace in June.

The Dow Jones industrial average was down 45 points, or 0.4 percent, at 12,002 as of 11:30 a.m. Alcoa Inc. fell 2.7 percent, the most in the Dow, followed by JPMorgan Chase & Co., 2.7 percent.

The Dow soared 490 points the day before, its biggest gain since March 2009, after central banks around the world slashed borrowing costs to shore up European banks and avert a deeper credit crisis.

The Standard & Poor’s 500 index fell 5 points, or 0.4 percent, to 1,241. The Nasdaq composite also fell 5, or 0.2 percent, to 2,615.

The euro moved higher against the dollar as investors became less fearful about Europe’s financial problems. Borrowing rates for France and Spain eased after both countries had successful auctions of new debt.

Macy’s Inc., Costco Wholesale Corp., Limited Brands Inc. and other retailers reported sales gains Thursday that surpassed Wall Street estimates. Costco and Macy’s gained 1 percent in early trading. Limited rose 1.4 percent.

Kohl’s Corp. fell 7 percent after the department store chain reported that a key revenue measure dropped sharply in November and fell far below Wall Street forecasts. Sales at stores open at least a year fell 6.2 percent; analysts had been expecting an increase of 2 percent.

Barnes & Noble dropped 10 percent after the bookseller posted a third-quarter loss instead of the slight profit analysts had expected. Sales also fell below analysts’ estimates.

Finisar Corp. lost 7 percent after the maker of fiber-optics components reported revenue that was lower than analysts were expecting.