Stocks Decline in Slow Session

Stocks meandered through a listless session Thursday, ending lower as investors ignored generally benign economic data and looked ahead to 2006 with a mix of optimism and concern.

Wall Street was unmoved by the Labor Department’s latest take on unemployment, the only economic indicator released before the session. Initial claims for unemployment benefits rose by an expected 4,000 last week to a seasonally adjusted 322,000.

Other economic reports were likewise mild. The Chicago Purchasing Managers Assn. index of Midwestern manufacturing activity was relatively steady at 61.5 in December, compared with 61.7 in November. And home sales declined modestly in November, according to the National Assn. of Realtors.

With the new year coming, investors consolidated their holdings with an eye toward the Federal Reserve, which is expected to stop raising interest rates early in 2006 -- though exactly when remains to be seen. And that uncertainty made it difficult to buy stocks.

“The economic news has been very good, but the Fed remains somewhat of a mystery,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “It’s the same problem that’s really held us back all month, and it’ll continue to be a problem until we get some more clarity from the Fed.”

The Dow Jones industrial average fell 11.44 points, or 0.1%, to 10,784.82.

Broader stock indicators also fell. The Standard & Poor’s 500 index lost 3.75 points, or 0.3%, to 1,254.42, and the Nasdaq composite index dropped 10.78 points, or 0.5%, to 2,218.16.

With today being the final trading session for 2005, the Dow is up just 0.02% to date, while the S&P; has risen 3.5% and Nasdaq has gained 2%.

“We’re just winding down the year, ending the year with these sort of small, middling gains, which to me makes sense because you’ve had opposing factors this year,” said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. “On the one hand, you’ve had good earnings and a robust economy, but on the other hand, you’ve been fighting the Fed. The two canceled each other out.”

In the bond market, U.S. two-year Treasury note yields rose above 10-year yields for the second time this week. The 10-year note fell to 4.36% from 4.37% on Wednesday, and the two-year note rose to 4.37% from 4.36%.

Longer-term debt usually yields more than shorter-term debt because investors take on more risk the longer they wait for repayment. Some economists view the so-called inversion as a possible warning of an economic slowdown.

Also Thursday, the government sold $20 billion in new two-year notes, offering investors a high yield of 4.40%.

Overall, the sale garnered 2.42 times the number of bids per dollar of debt on offer, well above an average 2.18 for the previous 11 auctions of 2005. But indirect bidders, which include foreign central banks, bought only 29.2% of the securities -- short of a year-to-date average around 35%.

In other market highlights:

* Energy prices rose after the government’s weekly inventory data showed minimal gains in crude oil reserves. A barrel of light crude settled at $60.32, up 50 cents, in New York trading.

* A gauge of computer-related shares slid 0.8% for the steepest decline among 10 industry groups in the S&P; 500. The technology group has lost 2.4% this month, the second-biggest drop. The S&P; 500 is up 0.4% in December.

Chip maker Intel lost 37 cents to $25.07 for the steepest retreat in the Dow average. Advanced Micro Devices, the world’s No. 2 maker of personal computer processors, snapped a six-day winning streak, losing $1.17, or 3.7%, to $30.53 for the worst performance in the S&P; 500.

* General Motors rose 40 cents to $19.01 after earlier falling to $18.33, its lowest price since 1982. The shares have dropped 53% this year.

* Hilton Hotels was the best performer in the S&P; 500 after it agreed to buy the lodging unit of Watford, England-based Hilton Group for $5.71 billion. Hilton shares climbed $1.70 to $24. Starwood Hotels & Resorts Worldwide added $1.14 to $64.25. Marriott International rose 74 cents to $67.76.

* Merck gained 44 cents to $32.35. The company’s per-share profit will increase 13% in 2009 and 8.5% in 2010 on cost cuts and the possible introduction of treatments for atherosclerosis and HIV, Morgan Stanley analyst Jami Rubin wrote in a note.

* Celgene rallied $4 to $64.85. Morgan Stanley analyst Sapna Srivastava expects the shares to reach $71, up from a previous estimate of $65. The analyst cited confidence that the company’s Revlimid drug to treat a rare blood cancer will meet or exceed its revenue estimates over the next several years.

* Alkermes surged $1.86 to $19.65. The maker of products based on drug-delivery technologies and Cephalon said they received a letter from regulators outlining additional data needed for approval of their Vivitrol treatment for alcoholism. The Food and Drug Administration may clear the shot after reviewing data on Vivitrol’s functioning in the body. Cephalon lost 22 cents to $64.45.