MARKET SNAPSHOT: U.S. Stocks Slip After Mixed Economic Data

By Kate Gibson

NEW YORK(MARKETWATCH) -- U.S. stocks slid Thursday as jobless claims fell but a measure of economic conditions in the Philadelphia region and global shipper FedEx Corp.'s outlook both disappointed.

"The jobless claims were better but the Philly Fed was much worse, but we've come to expect that the data is going to be mixed," said Noman Ali, senior portfolio manager at MFC Global Investment Management.

"We've moved up 8% from the bottom in a space of less than two months, so some correction is due," he added.

The Dow Jones Industrial Average (DJI) was off 14 points, or 0.1%, to 10,558.73, with 17 of its 30 components lower.

The Standard & Poor's 500-share index (SPX) fell 4.61 points, or 0.4%, to 1,120.46, with financials lagging the most among its 10 industry groups.

The Nasdaq Composite (RIXF) declined 10.66 points, or 0.5%, to 2,290.65.

Nearly two stocks fell for each on the rise on the New York Stock Exchange, where 404 million shares traded as of 1:30 p.m. Eastern.

Shares of FedEx Corp. (FDX) fell nearly 4% after the shipping giant reported its first-quarter profit more than doubled, but its outlook for second-quarter and full 2010 earnings disappointed Wall Street.

"The economy has weakened, so companies will be cautious in terms of giving guidance, so that's going to be an overhang in terms of stocks," said Ali.

That said, Ali has a bullish take on the equities market, at least in looking at the next six to 12 months, given the relative cheapness of equities, if one contrasts earnings yields on the S&P 500 versus corporate bond yields.

There are many stable companies with stable cash flows and dividend yields of 7% to 8%, yet at those same companies the corporate bonds yield 3% to 4%.

The scenario has helped drive recent merger activity said Ali, pointing to Intel Corp.'s (INTC) recent deal for McAffee Inc. (MFE), Sanofi-Aventis SA's (SNY) attempt to purchase biotech firm Genzyme Corp. (GENZ) and BHP Billiton Ltd.'s proposed takeover of fertilizer giant Potash Corporation of Saskatchewan Inc. (POT) .

Basically companies are saying, "I could borrow at 3% on the bond market and pick up these companies yielding 7% to 8%," said Ali.

"That is going to be a catalyst for equities to improve," Ali said.

The Federal Reserve Bank of Philadelphia reported manufacturing in the region contracted this month, defying expectations of a rise.

Conversely, the government said new claims for jobless benefits fell last week, with the more positive trend also unexpected.