Nasdaq, S&P; Up Slightly on Retail, Jobless Report
The Dow Jones industrial average extended its recent losing streak Thursday, but other market indexes eked out small gains as investors considered better-than-expected retail sales and a drop in unemployment claims that indicated the economy might be turning around.
Analysts said investors are still taking a breather from the market’s strong post-September rally. They also are waiting to see more fourth-quarter profit reports before making substantial commitments to stocks, analysts said.
“An [economic] recovery is built in, and where are we going to go from here?” said Gary Dugan, global market strategist for asset management firm J.P. Morgan Fleming.
“People have got some good profits to take. Unless companies can conjure up some better [earnings] surprises, people will just sit on their cash.”
Stocks in the Standard & Poor’s 500 index are selling for 22 times their forecast earnings this year--about the same price-to-earnings ratio as at the height of the bull market in March 2000, research firm Thomson Financial/First Call reported.
“Prices certainly have gotten ahead of earnings,” said John Davidson, president and chief executive at PartnerRe Asset Management.
“The fourth-quarter rally we had late last year and the rebound from the lows of 2001 were a positive.... But now people are going to wait to see that earnings come through and the economy turns.”
The blue-chip Dow industrials slipped 26.23 points, or 0.3%, to 10,067.86. It was the fifth straight losing session for the Dow, which has fallen almost 200 points during that span and given up most of its gains at the start of the year.
The technology-laden Nasdaq composite index closed up 2.35 points, or 0.1%, to 2,047.24. The broader S&P; 500 inched up 1.41 points, or 0.1%, to 1,156.55.
Winners and losers were even on both Nasdaq and the New York Stock Exchange. Trading was moderate.
Wall Street scanned retail sales for clues on the health of consumer spending, which accounts for two-thirds of economic activity. According to data from 84 retailers compiled by Bank of Tokyo-Mitsubishi, sales at stores open for at least a year rose 2.3% in December, surpassing the bank’s forecast for growth of 1.5%.
“The fact that those numbers came through fine underscores that things aren’t as bad as people think they are,” said John O’Donoghue, co-head of listed stock trading at Credit Suisse First Boston. Still, he said, “there’s no real impetus to be taking leaps and bounds to the upside.”
Retailer Gap rallied $1.83 to $16.35 and was the second-most-active stock on the NYSE after saying sales fell 11% in December, less than expected.
Wal-Mart Stores, the world’s largest retailer, edged up 60 cents to $57. The Dow component said sales rose 8% in December, topping its forecast.
The U.S. labor situation appeared to improve last week, with the government reporting a bigger-than-expected falloff in jobless workers applying for state unemployment aid.
The number of workers filing initial jobless claims fell by 56,000 to a seasonally adjusted 395,000 for the week ended Jan. 5 from a revised 451,000 a week earlier, the Labor Department said.
In other market highlights Thursday:
* Gold prices rose to a three-month high, climbing $3.70 to $287.10 an ounce in New York trading and pushing toward levels seen in the month after the Sept. 11 terrorist attacks. Traders labeled gold’s breakout a technical move. But the near-certainty that Newmont Mining will win the bidding for Normandy Mining, Australia’s largest gold producer, was a supporting factor, analysts said. Newmont rose 30 cents to $19.71.
* Ford Motor slumped $1.02 to $15.29. The company’s earnings will suffer because its ability to cut costs will be limited by contracts with the United Auto Workers union, investment bank UBS Warburg said.
Ford is expected to announce a massive restructuring plan today that could include the shuttering of some vehicle assembly plants and thousands of job cuts.
* Dow Chemical fell $2.94, or nearly 9%, to $31.06, on investor fears concerning the company’s asbestos liabilities.
* Technology stocks, among the biggest beneficiaries of the recent advance, sagged for a third session. IBM fell $2.35 to $122.14, and Intel lost 71 cents to $34.65.
* Strong demand for $7 billion in bonds sold by Freddie Mac, the biggest debt sale by a government-sponsored business, helped push Treasury yields to one-month lows. Freddie Mac, the second-largest buyer of U.S. mortgages, sold the 10-year notes at 5.77% as tame inflation lured investors to the fixed-rate securities.
The yield on the benchmark 10-year Treasury note slipped to 4.97% from 5.05% on Wednesday, its first dip below 5% since Dec. 5.
