Stocks gave up opening gains in mid-day trading after disappointing retail sales eroded early strength derived from a larger-than-expected drop in weekly jobless claims.

First-time filings for state unemployment benefits declined by 38,000 to a seasonally adjusted 550,000 last week. That's much lower than analysts' estimates of 580,000, according to a survey by Thomson Reuters. The four-week average of claims, which smooths out fluctuations, dropped to 555,250, its lowest level since late January.

Meanwhile, the number of people who continued to collect regular benefits rose by 69,000 to a seasonally adjusted 6.31 million the prior week, the Labor Department reported.

Investors originally took the jobless data as reason to push stocks higher, but that enthusiasm disappeared as the reality of mixed retail sales sank in. Many discount stores, which have held up in the recession, reported lower results. Costco Wholesale ( ) reported a 2% sales drop in the U.S. (excluding gasoline), and Target ( ) posted a worse-than-expected 6.5% decline.

Financial shares, however, continued to gain, initially supported by the Bank of England's more aggressive action to stimulate financial markets with an additional asset purchase. The Bank of England left interest rates alone as expected but came through with a more agressive action to buy assets. BOE will buy 50 billion pounds or $84 billion, about double what analysts expected.

Fannie Mae ( ) and Freddie Mac ( ) were among the most actively traded stocks, up sharply. The U.S. government is reportedling considering several options for the firms, including folding the companies into a new federal government entity. Also being considered, winding down the companies' operations and merging them into a federal agency. Several media firms are reporting the details following a Washington Post piece on the government's plans.