Stocks End Mixed in Light Trading Ahead of Holiday
Wall Street held steady Monday during an abbreviated Christmas Eve session, helped by buying in oil stocks on anticipation that OPEC would cut its output and oil prices would stabilize.
Worries about security after a reported bombing attempt aboard an American Airlines jet over the weekend hurt some airline stocks but failed to send the broader market lower.
The Dow Jones industrial average ended unchanged at 10,035.34. Broader stock indicators were also flat. The Standard & Poor’s 500 index fell less than a point, closing at 1,144.65, and the Nasdaq composite index dropped 1.35 points, or 0.1%, to 1,944.48.
Winners outnumbered losers by a thin margin on Nasdaq, and by a healthier 3-to-2 spread on the New York Stock Exchange. Volume was very light as U.S. stock markets closed three hours early at 1 p.m. EST for the Christmas holiday. The markets are scheduled to re-open Wednesday.
“You can’t read too much into a half-day of trading before a holiday,” said Larry Rice, chief investment officer at Josephthal & Co. “But considering that we still can’t find Bin Laden and you had some suggestion of terrorist activity over the weekend, the market’s doing quite well.”
ExxonMobil rose 50 cents to $39 on word that members of the Organization of the Petroleum Exporting Countries are expected to approve an agreement to cut production by 1.5 million barrels a day starting next month. Several non-OPEC countries also have indicated they would reduce output.
But airline stocks slid after reports that an American Airlines passenger had tried to detonate plastic explosives in his shoes on a transatlantic flight Saturday. Authorities said Monday they had no evidence to link him to Osama bin Laden’s terror network. American Airlines parent AMR slid 70 cents to $21.19, while competitor Continental lost 68 cents to $24.36.
Credit agencies also have downgraded the industry recently on concerns it is too weak to sustain any big problems.
“This is a bit of a knee-jerk reaction, not the story of the market today,” said Jim Weiss, chief investment officer for equities at State Street Research & Management. “The market is more listless than anything.”
Tech stocks, which have pulled back recently as investors consolidate gains from the recent big rally, also lagged. Cisco Systems lost 8 cents to $18.11, while Compaq Computer fell 27 cents to $9.67.
Wall Street shrugged off news that Argentina had declared a debt moratorium. Analysts said that’s because the announcement wasn’t surprising given the country’s financial and political problems. Many U.S. companies have had enough time to reduce their exposure in the region, limiting the fallout, analysts said.
The Argentine market remained closed, but may reopen Wednesday. In Mexico, the IPC index eased 0.1% to 6,374.49.
Meanwhile, Treasury yields rose on continued speculation that the U.S. economy will rebound in 2002, discouraging further interest rate cuts by the Federal Reserve. The yield on the benchmark 10-year Treasury note rose to 5.14% from Friday’s close of 5.08%, and the yield on the two-year T-note rose to 3.15% from 3.11%.
Treasury’s regular weekly auction of three- and six-month bills will take place on Wednesday.
In currency trading, the yen fell to 130.03 to the dollar in early trading today in Asia, the weakest since October 1998. As recently as Nov. 12 it took 120.53 yen to buy $1. The Japanese government has indicated it is willing to weaken the yen further to lower the cost of Japanese exports, in an effort to boost the struggling economy.
Barring any significant news, many stock market watchers expect trading activity to be relatively subdued for the rest of 2001 because of the holidays.
That doesn’t mean Wall Street won’t face a tough year ahead, however. For the second year in a row, major indexes probably will end this year below where they started, and there is still concern that stock prices are too high given the weakness in corporate profits.
Stocks have rallied considerably since the precipitous sell-off that followed the Sept. 11 terror attacks, but have recently been stuck in a narrow trading range. The Dow has hovered around 10,000; the Nasdaq has been unable to move much higher than the 2,000 level.
Year to date, the Dow is down nearly 7%, the S&P; 500 is down 13.3% and the Nasdaq composite is off 21.3%.
Merrill Lynch chief U.S. strategist Richard Bernstein issued a research note Monday warning that “the market is riskier and more speculative than most investors believe.”
