FINANCIAL MARKETS : Dow Off 3.98 on Pessimism Over Budget
Stocks closed slightly lower Friday after a week of convulsions as markets faced up to the harsh reality that a balanced-budget deal in Washington may not materialize.
“We may not get a budget, and a cloud of uncertainty will hang over us until November. I can’t imagine a worse scenario,” said Ricky Harrington, technical analyst at Interstate/Johnson Lane.
The Dow Jones industrial average fell 3.98 points to 5,061.12, after sinking more than 40 points earlier. The index was down 120.31 points for the week. Friday’s modest decline followed drops of 68 points Tuesday and 97 points Wednesday.
The Nasdaq composite index, a leading barometer of the high-technology sector, closed down 2.87 points at 1,008.23, down 25.24 points for the week.
“The market is now trying to discount the possibility that we will not get a budget agreement or, at best, an an interim one,” said Michael Metz, chief investment strategist at Oppenheimer & Co.
A report from the Federal Reserve Bank of Atlanta reported a drop in the number of area manufacturers reporting increased production, reflecting a weakening economy. “People are sensing that the economy is slowing, and this means earnings are going to be difficult to compare with last year’s,” said John Trammel, money manager in charge of $100 million at A. Gary Shilling & Co.
The benchmark 30-year Treasury bond closed unchanged at a yield of 6.15% after a volatile session.
Among the high techs, NetManage was one of the biggest losers today. The stock, which topped the Nasdaq most active list, tumbled 3 11/16 to 10 7/8.
The company said that it expected its earnings from operations for the fourth quarter to be lower than the year-earlier period although it predicted a rise in revenues.
It was the latest blow to high technology shares, increasing investor unease about the group. Confidence has already been eroded by Apple Computer Inc., which warned on Wednesday that it expected a quarterly loss, and a disappointing fourth quarter report from Motorola Inc. on Tuesday.
Dell Computer said its stock fell on news that Morgan Stanley had cut its fourth quarter earnings estimates on the company. The stock was down 4 7/8 at 28 5/8.
Sybase was down 2 3/4 at 28 3/4, Sun Microsystems was down 2 at 40 1/8, Microsoft fell 7/8 at 85 3/4, Micron Technology, the most actively traded issue on the NYSE, was down 3 3/8 at 32 7/8 and Dow component International Business Machines was down 7/8 at 86 3/8.
Among market highlights:
* The Atlanta report undercut deep cyclical stocks, which are generally sensitive to changes in the economy. International Paper, for example, fell 3/8 to 38 3/8. Caterpillar fell 7/8 to 58 1/2. Retailer Kmart lost 5/8 to 7 as its bond rating was cut to junk status by S&P.;
* More recession-resistant stocks, such as consumer products, drugs and tobacco shares, rose. Johnson & Johnson added 2 to 85 3/4, after Merrill Lynch upgraded the stock. Philip Morris gained 2 3/8 to 90 1/4.
Gold stocks also fell with gold prices. Newmont Mining fell 2 1/2 to 51 1/4. Newmont said that Salomon Bros. has agreed to buy 4.65 million shares of its common stock at Thursday’s NYSE close of $53.75 a share.
Newmont said the deal, combined with the recent redemption of convertible preferred shares, will not dilute earnings.
* Lehman Bros. added Banc One to its recommended list, a market source said. The stock was up 1/18 at 36 7/8.
* Oil stocks fell as oil futures dropped. Texaco slid 1 3/4 to 76 1/4, while Exxon dropped 1 3/8 to 79 3/8.
Energy prices tumbled for a second consecutive session Friday as traders focused on forecasts for warmer weather even as another winter storm pummeled the East Coast.
“The market is clearly rattled now and it could take some weeks to turn the corner,” said John Saucer of Smith Barney.
Crude oil for February delivery sank 54 cents to $18.25 a barrel, its lowest level in six weeks, at the New York Mercantile Exchange.
Also at the exchange, February heating oil sank 2.59 cents to 53.57 cents a gallon, February gasoline lost 1.34 cents to 53.10 cents a gallon, and February natural gas slid 17.3 cents to $2.317 for 1,000 cubic feet.
The abnormally cold winter thus far has increased demand for fuel but the snows kept cars off of the roads and reduced gasoline consumption. Warmer temperatures were expected to ease demand for heating fuels.
Meanwhile, the American Petroleum Institute reported late Thursday that crude oil stocks declined in the week ended Jan. 5, but gasoline supplies increased.
