Stocks slip after Capital One warning


NEW YORK -- Stocks fell Thursday after a profit warning from Capital One Financial Corp. but came off their early lows after a new reading suggested the economy might not have been as weak in the fourth quarter as originally thought.

Capital One, the credit card issuer, warned that its 2007 profit will fall short of previous expectations because of increased loan delinquencies and additions to its legal reserves in the fourth quarter.

The Commerce Department said Thursday that inventories among U.S. wholesalers rose by a greater-than-expected 0.6% in November. Wall Street had expected a 0.4% increase, according to Dow Jones Newswires.

However, the report showed sales of U.S. wholesalers rose by 2.2% in November to a seasonally adjusted $380.35 billion -- the biggest increase since September 2005. The agency also said sales growth in October was more than double the 0.7% that had been estiamted.

The sales figures showed the fourth quarter might have been stronger than had been believed.

Investors are anxious for further insights into the health of the economy and are hoping for hints from Federal Reserve Chairman Ben Bernanke. He is expected to speak on monetary policy at 1 p.m. EST. His speech comes one day after Goldman Sachs rattled some investors by forecasting a recession for 2008.

In midmorning trading, the Dow Jones industrial average, which had been down more than 100 points in early trading, fell 12.68, or 0.10%, to 12,722.63.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 3.14, or 0.22%, to 1,405.99, and the Nasdaq composite index fell 9.09, or 0.37%, to 2,465.46.

On Wednesday, Wall Street finished a volatile session sharply higher as investors sought bargains but remained concerned about the strength of the economy and upcoming corporate results. The Nasdaq showed its first gain in nine sessions, while the Dow gained nearly 150 points.

Oil prices fell Thursday, building on an overnight decline on a U.S. government report that the country's stockpiles of gasoline grew last week. Light, sweet crude for February delivery fell $1.72 to $93.75 a barrel in premarket trading on the New York Mercantile Exchange.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.80% from 3.83% late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.

In a positive sign, Wall Street also received an economic reading that indicated the labor market might be firmer than first thought. The Labor Department said Thursday the number of workers filing new claims for unemployment benefits tumbled to a two-month low last week.

Initial claims for jobless benefits fell 15,000 to 322,000 after seasonal adjustments in the week ended Jan. 5, the Labor Department said Thursday. Wall Street economists had expected a 4,000 rise. The weekly readings are volatile, however.

Meanwhile, retailers were issuing December sales reports that generally came in weaker than already expected, an indication that consumers are becoming more hesitant as they contend with higher gas prices and the ongoing housing slump.

In corporate news, Capital One fell $2.85, or 6.6%, to $40.50 after its warning. The company said it is taking a $1.9 billion provision for loan losses in the fourth quarter, including about $1.3 billion in charge-offs.

The announcement confirmed fears of some analysts that the erosion of the subprime mortgage market has hurt other credit classes. It also renewed jitters that slowing economic growth could hurt upcoming corporate earnings reports more than previously thought.

In other news, a combination involving Delta Air Lines Inc. may be close, the head of the carrier's pilots union said in a letter to rank-and-file members Wednesday. In November, Delta denied reports that it was talking to UAL Corp.'s United Airlines about a combination. Since then, it has said little about the issue. Some analysts have suggested recently that a Delta-Northwest combination may be possible.

Delta gained 97 cents, or 7.2%, to $14.49. UAL rose $2.85, or 11%, to $28.88, while Northwest jumped $2.10, or 17.5%, to $14.11.

Overseas, Japan's Nikkei stock average closed down 1.45%. In afternoon trading, Britain's FTSE 100 fell 0.47%, Germany's DAX index dropped 0.21%, and France's CAC-40 fell 0.21%.