But the rise in oil also weighed on some sectors, such as airlines. United Airlines parent UAL Corp. fell $1.07, or 8.6 percent, to $11.33, while Continental Airlines Inc. fell 82 cents, or 5.4 percent, to $14.34.

With the focus on oil and financials, investors appeared unimpressed by a better-than-expected snapshot of demand at some factories. The Philadelphia Fed said regional manufacturing activity is increasing in August by more than it did in July.

The Conference Board's leading economic indicators report, which is designed to predict economic activity in the next three to six months, showed a 0.7 percent drop for July compared with a 0.1 percent decline in June.

Investors also looked past a larger-than-expected drop last week in unemployment claims from newly laid-off workers. The four-week moving average for claims hit a nearly seven-year high. The Labor Department said claims fell by 13,000 to 432,000, but that the four-week average rose to 445,750.

A shaky job market has been slamming consumers who also face a tighter credit climate, rising costs and falling home prices. That is troubling to investors as consumer spending accounts for more than two-thirds of U.S. economic activity.

"All three reports tend to indicate that we're bottoming out but that there is no real end in sight and that's what I think the market has to get used to," said Doug Roberts, chief investment strategist at Channel Capital Research.

The fluctuations of oil and financials dictated the mood on Wall Street Thursday. Investors have been fearful as banks and other lenders are hit by consumers who are falling behind on payments for mortgages and other debt. A slew of analysts have been downgrading banks and brokerages over the past few weeks, and late Wednesday, Citigroup lowered its third-quarter estimates for the investment banks Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Morgan Stanley. Citi predicted Lehman will write down its assets by $2.9 billion, that Goldman will write down $1.8 billion and that Morgan will write down $1.7 billion.

But the Ladenburg Thalmann note helped the sector, by arguing that Lehman Brothers' management values the company at a premium and would be willing to sell at the right price.

Lehman ended down 1 cent at $13.72, while Goldman Sachs fell $1.83 to $156.42 and Morgan Stanley fell 34 cents to $37.06.

The fluctuations came a day after fresh worries emerged about the possibility of a government bailout of government-chartered mortgage companies Fannie Mae and Freddie Mac. Such a move could wipe out shareholder equity.

Fannie and Freddie ended mixed after falling more than 20 percent Wednesday. Fannie rose 45 cents, or 10 percent, to $4.85, while Freddie fell 9 cents, or 2.3 percent, to $3.06.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to a light 912 million shares compared with 1.07 billion shares traded Wednesday.

The Russell 2000 index of smaller companies fell 6.35, or 0.87 percent, to 725.25.

Overseas, Japan's Nikkei stock average fell 0.77 percent. Britain's FTSE 100 slipped 0.03 percent, Germany's DAX index fell 1.28 percent, and France's CAC-40 fell 1.40 percent.

---

On the Net:

New York Stock Exchange: www.nyse.com

Nasdaq Stock Market: www.nasdaq.com