Stocks End Mixed; Treasury Yields Rise
Stocks were mixed Friday as investors digested fresh evidence of an economic slowdown and a stream of positive news from the U.S.-led military effort in Afghanistan.
In the bond market, yields on U.S. Treasury securities rose for a sixth straight session as fixed-income investors bet the economy could be bottoming, driving yields on 10-year notes back to levels last seen on Sept. 10, the day before the attacks on the United States that led to massive buying of government issues.
The new economic figures showed U.S. industrial output last month extended a string of monthly declines that was the longest since the Great Depression of the 1930s, the Federal Reserve said. Another report showed U.S. inflation remains tame.
In Afghanistan, the hard-line Islamic Taliban were reported withdrawing from their southern stronghold of Kandahar and heading for the mountains. And U.S. officials cited credible reports that a top aide to Osama bin Laden had been killed in a U.S. airstrike.
“There has been an easing of anxieties about the war in Afghanistan, but Americans are still edgy about any possible terrorist retaliation on our shores,” said Alan Ackerman, market strategist at Fahnestock & Co. “The industrial production numbers left a lot to be desired. The sense that the market rally presages a turn in the economy may need more time to develop.”
The positive news from Afghanistan helped the major indexes recover from mid-session lows and close near break-even. The indexes enjoyed their sixth positive week in the last eight, continuing the rally that has gathered steam since Sept. 21, the market’s low point after the Sept. 11 terrorist attacks.
The blue-chip Dow Jones industrial average, off 80 points at one point, closed down 5.40 points, or 0.1%, at 9,866.99. The broader Standard & Poor’s 500 index dipped 3.59 points, or 0.3%, to 1,138.65. The technology-laden Nasdaq composite index edged down 1.99 points, or 0.1%, to 1,898.58.
Winners led losers by 9 to 7 on the New York Stock Exchange and by 5 to 4 on Nasdaq. Trading was moderate.
Investors opted to sell selected stocks after the recent run-up, after some downbeat earnings reports or forecasts from household names such as high-tech giant Dell Computer, down $1.09 to $26.60, retailer Gap, off 45 cents to $14.10, and coffee chain Starbucks, off $1.67 to $17.50.
“The market had a big move in a very short period of time ... and without a positive earnings stream underpinning this kind of rally, many stocks are under some profit-taking,” Ackerman said.
Financial services companies American Express and Citigroup took a hit after downgrades by Wall Street analysts. American Express fell $1.26 to $33.13 and Citigroup fell $1.29 to $48.80.
During the session, many traders took profits from a run-up that has lifted the broader stock market about 7% in the last two weeks. They are preparing for a sluggish trading week next week because of the Thanksgiving holiday on Thursday.
In the preceding three trading days, the Dow had risen 318 points, or 3.3%. For the week, the Dow gained 2.7% and Nasdaq rose 3.8%. The S&P; 500 gained 1.6%.
Xerox, embroiled in a probe by federal regulators and allegations of accounting irregularities, appointed a new accounting chief and saw its shares fall 51 cents to $6.58.
There was no let up in selling of Treasury securities. Yields have surged over the last week as investors have dumped ultra-safe government issues and switched to higher-risk corporate bonds and stocks, betting on an economic recovery.
At the same time, expectations of more Federal Reserve interest rate cuts have diminished.
On Friday, the yield on the benchmark 10-year T-note jumped to 4.85% from 4.77% on Thursday and 4.18% on Nov. 7. The yield on the two-year note rose to 3.03% from 2.98% on Thursday and 2.29% on Nov. 7.
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Market Roundup: C4, C5
