Labor Department reported that unit labor costs advanced a revised 3.3% annualized in 1Q, up vs. the earlier estimate of 2.2%. Productivity was revised to a 2.9% annual growth rate from the 2.6% forecast a month earlier.

The Labour Department also reported that first-time filings for state unemployment benefits grew sharply in the latest week, mainly due to temporary layoffs in the auto sector. The number of initial claims in the week ending May 28 grew 25,000 to 350,000.

The Commerce Department reported that demand for U.S.-made factory goods rose 0.9% in April, the fastest in five months. Still, the jump disappointed the 1.1% seen by economists.

Corporate layoff announcements advanced by 42% in May to 82,283. Job cuts in the computer industry soared to 17,886 in May as companies responded to the weaker demand in Europe.

The Department of Energy reported that crude supplies jumped by 1.4 million barrels in the week ending May 27, and are still well above the higher end of the average for this time of year. Gasoline supplies increased by 1.3 million barrels.

The May employment report is due Friday. Employers are seen to have added 190,000 to their payrolls, after adding 274,000 in April. The unemployment rate is expected to hold steady at 5.2%.

Dow -17.44, Nasdaq +2.66, S&P 500 -0.90.

The dollar traded at 108.21 yen, down vs. 108.77 yen late Wednesday, while the euro advanced to $1.2294 vs. the dollar from $1.2205.

COMEX gold rallied $4.70 to $422.40 an ounce.

The computer hardware sector dipped and has been holding lower recently. The sector is now posting a drop of a little less than 1%. Bank and drug stocks are also slightly weaker.

The airline space has made gains and is up 3.5%, reaching its highest level since mid-April. The gold has advanced 2.4%.

In the banking sector, shares of JP Morgan Chase (JPM: chart) dropped 1.4% to $35.27 after president Jamie Dimon announced late Wednesday that the bank's trading 2Q profit would be its worst in recent memory.

Citigroup Inc. (C: chart) has agreed to acquire Federated Departments Stores' $4.4 billion credit-card receivables portfolio, and the $2.2 billion credit-card receivables portfolio of May Department Stores within a year of the closing of the merger of May and Federated.

Citigroup is also planning a deal with Legg Mason (LM: chart) under which it would exchange its in-house mutual-fund business for Legg Mason's broker network. Citigroup might get a big stake in Legg Mason. Citigroup shares were off 0.3% while shares of Legg Mason rallied 4.2%.

Sun Microsystems Inc. (SUNW: chart) said it is acquiring Storage Technology Corp. (STK: chart) for $4.1 billion in cash in a deal seen to add to earnings before items in the first year. Sun shares were down 2.3% at $3.80 while Storage Tech soared 17% to $36.48. The deal values Storage Tech shares at $37 each.

EBay Inc. (EBAY: chart) shares fell 1.3% to $38.60 after it announced late Wednesday that it was buying Shopping.com (SHOP: chart), an online comparison shopping site for $620 million in cash. Shopping.com's stock surged 19% to $20.75 in morning trading.

Some of the retailers posting positive same-stores sales growth in May were Nordstrom, Costco, J.C. Penney and Walgreen. Other retailers seeing a decline in same-store sales in May were Sharper Image, Saks Inc. and Gymboree.

Wal-Mart Stores (WMT: chart) reported a 2.5% jump in same-store sales in May mainly on food sales. The world's largest retailer expects same-store sales to grow between 2% to 4% in the five-week June period.

Target Corp. (TGT: chart) posted a 5.1% rise in May same-store sales, slightly ahead of its forecast for growth of 3% to 5%.

Wal-Mart shares were up 0.3% at $48.04, while shares of Target climbed 1.5% to $54.65.

Shares of The Gap Inc. (GPS: chart) plunged 2.4% to $20.83 after same-store sales declined at the company's three apparel chains.