Stocks slip as new worries arise about pace of economic recovery

Energy company stocks dragged on the overall market after crude inventories rose more than expected last week, according to a weekly Energy Department report. The rise prompted worries that weakness in the economy was curbing demand for energy.

Occidental Petroleum fell $2.21, or 3.1%, to $69.48, while Schlumberger fell $2.11, or 3.9%, to $54.60.

Light, sweet crude fell $3.88 to $63.35 a barrel on the New York Mercantile Exchange.

Energy and materials stocks began the day lower after a drop in stocks in China. The main Shanghai index tumbled 5% as reports suggested that China's two state-owned banks have been asked to limit their lending.

In corporate news, Microsoft and Yahoo.announced a 10-year deal that gives Microsoft access to the Internet's second-largest search engine audience. Microsoft rose 33 cents to $23.80, while Yahoo fell $2.08, or 12.08%, to $15.14.

Investors have grown cautious after a two-week surge of 11% in major stock indexes that began when earnings reports were stronger than expected. A handful of disappointing earnings reports earlier in the week reminded investors that an economic recovery may still be far off.

Stocks were little changed after the Federal Reserve said that the economy is beginning to show signs of stabilizing in some parts of the country, bolstering hopes of a broader-based recovery this year.

The central bank's snapshot of economic conditions found that most of the Fed's 12 regions indicated either that the recession was easing or that economic activity had "begun to stabilize, albeit at a low level."

About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 667.8 million shares compared with 746.7 million traded at the same point Tuesday.

The Russell 2000 index of smaller companies fell 3.57, or 0.6%, to 548.39.

The dollar was mixed against other major currencies, while gold prices fell.

Overseas, Japan's Nikkei stock average rose 0.3%. Britain's FTSE 100 rose 0.4%, Germany's DAX index rose 1.9%, and France's CAC-40 advanced 1%.

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