Stocks Mostly Higher on Positive Inflation News
Stocks ended broadly higher Friday, though blue-chip indexes closed with minor losses.
Markets in general had a good reaction to the government’s report that wholesale inflation in May was relatively tame.
Meanwhile, in Europe, major stock markets edged higher despite the European Central Bank’s surprise decision Thursday to boost its benchmark short-term interest rate to 4.25% from 3.75%.
On Wall Street, winners topped losers by 17 to 12 on the New York Stock Exchange and by 23 to 15 on Nasdaq, though trading volume slowed sharply in both markets.
The Nasdaq composite gained 49.28 points, or 1.3%, to 3,874.84, its highest since May 1. The Nasdaq registered a net gain of 1.6% for the week, as many “new economy” technology stocks continued to bounce back.
The Dow industrials, however, eased 54.66 points, or 0.5%, to 10,614.06 on Friday, and lost 1.7% for the week, as worries about corporate profits in a slowing economy hurt the “old economy” stock sector.
The Standard & Poor’s 500 index was off 0.3% on Friday and 1.4% for the week.
The bond market on Friday just yawned at the inflation data, with yields mostly unchanged--and near their lowest levels in six weeks. The 10-year Treasury note yield slipped to 6.13% from 6.14% Thursday.
“People are feeling a little more comfortable” with the bond market, said Mitch Stapley, who invests $3 billion at Kent Funds in Grand Rapids, Mich. Benign inflation data, and more signs of a slowing economy, could mean the Federal Reserve is near the end of its credit-tightening campaign.
As for stocks, however, earnings warnings this week from Procter & Gamble, Mylan Labs and Electronic Data Systems may have been the first of the usual barrage of warnings that come near the end of every quarter.
“Even though corporate earnings [overall] are good, if the Fed is raising rates, there’s no guarantee that they’ll continue to be good,” said Phil Foreman, senior portfolio manager at Evergreen Investment Management in Boston.
Among Friday’s highlights:
* P&G; fell further, down 50 cents to $57, after its warning Thursday about earnings, which it said will be hurt in part by tougher competition.
Also, McDonald’s fell $1.56 to $33.88. Analysts said the world’s biggest restaurant chain’s May sales at stores open at least a year declined more than expected.
Mylan, a drug company, slumped $6.31 to $17.31 after saying earnings will be hurt by lower prices.
* In the tech sector, EDS crumbled $13.94 to $43.88 after the No. 2 U.S. computer-services company said second-quarter sales will be lower than expected.
Also, Lucent Technologies fell $3.63 to $59.13. Lehman Bros. lowered its estimate for the company’s fiscal 2000 revenues and profits, saying the company is suffering from a decline in a leading product line of switches.
Yet investors still snapped up many other tech stocks. Sun Microsystems gained $2.44 to $89.94, Cisco Systems added 69 cents to $64.38 and Applied Materials rose $2.19 to $94.88.
Many biotech stocks also resurged, driving the Amex biotech index up 7%.
* Banking stocks ended lower as Wall Street analysts continued to question the profit outlook for the industry. J.P. Morgan fell $4.19 to $128.56.
* On the plus side, utilities, entertainment and airline stocks generally were higher on the day.
Market Roundup, C4
