Market flat on weak factory data, but AIG up

NEW YORK - Stocks were little changed on Thursday, with the Dow hovering around the 12,000 level, after a regional report on factory activity fell more than expected, raising doubts about the economy's health.

Blue-chip insurer American International Group (AIG.N), however, helped support the Dow after Citigroup lifted its rating on the world's largest insurer to "buy" from "hold," saying the stock is poised for growth of over 35 percent in the next 12 months.

The Philadelphia Federal Reserve Bank said its business activity index, which measures Mid-Atlantic factory activity, was minus 17.1 in June, below the minus 10 reading economists had forecast. Any reading below zero indicates contraction.

The Philly Fed report "reflects weakness in the industrial sector," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates, in Toronto, Canada. "It also means Wall Street's earnings forecasts have to be trimmed for the second quarter and the second half of the year. Estimates on earnings have been lagging reality."

Investors are paying close attention to economic indicators before the Federal Reserve's interest-rate setting meeting on Tuesday and Wednesday next week.

The Dow Jones industrial average (.DJI) was up 13.92 points, or 0.12 percent, at 12,042.98. The Standard & Poor's 500 Index (.SPX) was up 0.74 of a point, or 0.06 percent, at 1,338.55. The Nasdaq Composite Index (.IXIC) was up 4.95 points, or 0.20 percent, at 2,434.66.

Also weighing on the market were sharp declines among managed care stocks after Coventry Health Care (CVH.N) cut its second-quarter and 2008 earnings per share outlooks late on Wednesday.

Coventry shares tumbled 23 percent to $30.77, while shares of rival UnitedHealth Group (UNH.N) fell 6.6 percent to $28.22 and WellPoint (WLP.N) stock dropped 6 percent to $48.86.

AIG shares shot up 2.8 percent to $32.39 on the New York Stock Exchange.

(Agencies)