- Associated Press - Thursday, February 7, 2013

NEW YORK (AP) — Stocks slumped Thursday on Wall Street, and the rally that has pushed indexes close to record levels stalled.

The Dow Jones industrial average fell 42 points to 13,944, after sliding as much as 134 points earlier. The index has edged lower this week, after logging its best January in almost two decades.

The Standard and Poor’s 500 fell three points to 1,509, and the Nasdaq composite dropped three points to 3,165.

“We had such a big January, some type of weakness, or consolidation, make sense here to us,” said Ryan Detrick of Schaeffer’s Investment Research in Cincinnati.


The S&P 500 has lost an average of 0.58 percent in February during the past 20 years, making it the weakest month for stocks, according to research by Schaeffer’s.

Stocks fell as weaker earnings and worries about Europe overshadowed healthier signs for the U.S. economy.

Fewer Americans sought unemployment benefits last week, a sign that layoffs are easing. Applications for unemployment benefits fell 5,000 to 366,000.

But the stock price of News Corp. fell 66 cents, or 2.3 percent, to $27.52 after the media conglomerate cut its forecast for annual earnings. Weakness at several businesses, including its Fox broadcast network, should offset a gain in earnings in the most recent quarter.

Investors also worried about comments from European Central Bank President Mario Draghi. He pledged to keep a close eye on the rising euro, fearing that the currency’s rally in recent month could hurt exports and further harm the region’s fragile economy.

“You could have very weak growth in Europe for the next five or 10 years,” said Michael Sheldon, chief strategist at RDM Financial Group. “There’s a lot of austerity going through the European markets, so it’s going to be a long time before they re-establish themselves.”

Most of Europe’s major stock indexes ended the day lower. Only Germany and Greece bucked the trend.

Europe has returned to investors’ radars after several months of relative quiet. Stocks fell on Monday, partly because of a spike in borrowing costs for Italy and Spain. That increase reignited concerns that those countries won’t be able to service their debts.

Still, some say the decline is more of a pullback than a sell-off and will give investors a chance to buy stocks at lower prices in anticipation of the market’s resuming its rally.

Stocks have jumped this year on optimism that the housing market will sustain its recovery and the job market will slowly heal. Corporate earnings growth has also accelerated.

“There’s really nothing new to worry about it,” said Sam Stovall, chief equity strategist at S&P Capital IQ.

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