US blue-chip shares fell on Thursday as fierce fighting and a spate of kidnappings in Iraq made investors cautious ahead of a three-day Easter weekend, while bond prices slipped after signs of a strengthening job market stoked fears of higher interest rates.
The worsening security situation in Iraq supported bullish sentiment in energy markets, sending crude oil up nearly US$1 a barrel, and limited declines in gold, seen as a safe-haven investment.
The dollar rose broadly, helped by evidence of a firming US labor market, while gold eased from a 15-year high reached a week ago.
Disappointment over Wal-Mart Stores Inc's profit prospects forced the Dow lower, while technology stocks held on to slight gains driven by a jump in earnings from Yahoo Inc and a bullish revenue forecast by Dell Inc.
Wal-Mart was the biggest drag on the blue-chip Dow average as the world's biggest retailer dashed hopes it would raise its profit forecast after some of its peers raised theirs. Its shares fell US$1.29, or 2.2 percent, to US$56.69.
The Dow Jones industrial average ended down 38.12 points, or 0.36 percent, at 10,442.03. The Standard & Poor's 500 Index declined 1.20 points, or 0.11 percent, to 1,139.33, while the technology-laden NASDAQ Composite Index rose 2.64 points, or 0.13 percent, to 2,052.88.
US bond prices fell after a surprising decline in the number of Americans applying for first-time jobless benefits shook an already battered market. With weekly claims now at the lowest level in more than three years, traders worried that the Federal Reserve might start hiking interest rates sooner than previously thought.
"The lower-than-expected number of new jobless claims shows that the labor market is continuing to improve," said Gary Thayer, chief economist at A.G. Edwards and Sons.
The benchmark 10-year note dipped 7/32 to a price of 98-15/32 for a yield of 4.19 percent, up from 4.16 percent late on Wednesday. The 30-year bond was off 10/32 at 105-3/32 to yield 5.03 percent, from 5.01 percent.
The dollar rose after the government said first-time US unemployment claims fell to 328,000 in the week to April 3, clearly undercutting forecasts of a smaller drop to 340,000.
"It shows continued improvement in the US labor force ... and should bode well for the whole economic picture," said Tim Mazanec, senior currency strategist with Investors Bank & Trust in Boston.
In late New York trade, the euro was at US$1.2085, a loss of 0.7 percent from US$1.2173 on Wednesday, according to Reuters data. The dollar rose more than 1 percent above 106.40 yen before edging back to 106.25, up from 105.25 yen late Wednesday in New York.
NYMEX crude oil futures jumped nearly US$1 a barrel, driven in part by bullish sentiment as insurgents in Iraq battled with US military forces.
Prices were bolstered by another sharp rise in gasoline futures, aided by an explosion and fire at a refinery in New Mexico.
Crude for May delivery rose 99 cents to settle at US$37.14 a barrel, while May gasoline jumped 3.83 cents to US$1.1508 a gallon.
COMEX gold fell on pre-holiday profit taking triggered by the dollar's gains. But gold held to a small range as the violence in Iraq underpinned the metal.
Gold for June delivery fell US$3 to settle at US$420.70 an ounce. It has been consolidating since reaching a 15-year high at US$433 a week ago.
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