Stocks follow surge with sputtering fall

A rally that drove major stock indexes up 7 percent this week stalled Thursday. They ended lower a day after the Dow Jones industrial average soared 490 points, its seventh-best gain on record.

Another rise in applications for weekly unemployment benefits dampened the mood yesterday. The Labor Department said initial applications rose to 402,000 last week, the second weekly increase in a row. The figures didn't change expectations for the government's monthly labor report, due out today. Economists forecast the jobless rate will stay 9 percent.

Goldman Sachs and other banks, star performers Wednesday, gave up some of their gains. Costco, Nordstrom and other retailers rose after reporting stronger sales for November.

The Dow fell 25.65 points, or 0.21 percent, to close at 12,020.03. Its surge Wednesday came on news that central banks around the world slashed the cost of borrowing to shore up European banks and avert a deeper credit crisis in the region. If a major European bank were to fail or if one or more countries defaulted, investors fear it could result in a freeze-up in global lending markets like the one that occurred in 2008 when Lehman Brothers collapsed.

The Standard & Poor's 500 index Thursday slipped 2.38, or 0.19 percent, to 1,244.58. The Nasdaq inched up 5.86, or 0.22 percent, to 2,626.20. -- AP