Wall Street sags, but ends off session lows; HP hits 52-week high

By Angela Moon

NEW YORK (Reuters) - Stocks slipped on Thursday but finished sharply off their session lows as a rally in Hewlett-Packard's shares offset worries about weak Chinese manufacturing data and the prospects of the Federal Reserve reducing its monetary stimulus.

Trading was choppy as many traders were adjusting their positions ahead of the long holiday weekend. Markets will be closed on Monday for Memorial Day.

Hewlett-Packard (HPQ.N) shares jumped more than 17 percent to a fresh 52-week high a day after the world's largest PC maker raised its outlook. The stock's surge supported the Dow and helped limit the S&P 500's decline.

For most of the morning, the market had been pulled lower by worries that the Fed's stimulus may be scaled back sooner than hoped and after weak factory data in China.

"People are using any kind of weakness as a buying opportunity and that's why you see a fairly quick snapback throughout the day (after) what was some broad selling in the morning," said Alan Lancz, president of Alan B. Lancz & Associates Inc, based in Toledo, Ohio.

"Investors are limited with their alternatives just because it's such a low interest-rate environment.

The Dow Jones industrial average (.DJI) fell 12.67 points, or 0.08 percent, to 15,294.50 at the close. The Standard & Poor's 500 Index (.SPX) slipped 4.84 points, or 0.29 percent, to finish at 1,650.51. The Nasdaq Composite Index (.IXIC) dropped 3.88 points, or 0.11 percent, to close at 3,459.42.

Hewlett-Packard Co (HPQ.N) shares surged 17.1 percent to end at $24.86, a day after the computer maker raised its 2013 earnings outlook following quarterly results that beat low expectations. The stock touched a new 52-week high of $24.95 earlier in the session.

Signs of improvement in the housing and labor markets also helped indexes come off their lows by midday.

Earlier, the S&P 500 traded below its 14-day moving average before bouncing back above it. Holding above that level would be positive sign to investors as it would suggest the uptrend is still intact.

Ralph Lauren Corp (RL.N) shares lost 2.3 percent to $183.69 after the fashion company reported sales below its own projections.

On Wednesday, the S&P 500 (.SPX) posted its biggest decline in three weeks after minutes from the U.S. Federal Reserve's latest meeting showed some officials were open to tapering large-scale asset purchases as early as at the June meeting.

The minutes came in the wake of comments from Fed Chairman Ben Bernanke, who said the Fed could scale back the pace of its bond purchases at one of the "next few meetings" if the economic recovery looked set to maintain forward momentum.

When the Fed may decide to slow or halt its program of buying $85 billion of bonds a month has become one of the biggest questions on investors' minds. The central bank's stimulus efforts have helped propel markets to all-time highs this year and investors are trying to gauge whether a change in the program could spell the end of the rally.

"It isn't their absolute level of involvement in buying bonds that's going to determine the stock market. It's going to be the perception of whether they're there or not," said Uri Landesman, president of Platinum Partners in New York.

"Once they really meaningfully step away, investors are going to realize they're just not going to be there and that the market's going to have to stand on its own feet."

On the economic front, the number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting strength in the labor market. New home sales rose in a sign that the sector's rebound is still intact. But separate data showed manufacturing slowed for a second straight month in May.

Volume was roughly 7 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, exceeding the year-to-date average daily closing volume of about 6.4 billion.

On the NYSE, decliners beat advancers by a ratio of about 17 to 12. On the Nasdaq, the opposite trend prevailed, with about 13 stocks rising for every 12 that fell.

(Additional reporting by Leah Schnurr; Editing by Jan Paschal)

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