Market Stumbles to End Grim Week
Blue-chip stocks stumbled Friday to wind up their worst week since September, as a fall in consumer confidence overshadowed a double dose of positive earnings news from General Electric and Dell Computer.
The Dow Jones industrial average suffered its fourth triple-digit slide in five days, widening its loss for the week to 7.4%. The broader Standard & Poor’s 500 index sank 6.8% during the week, and for both indexes it was the biggest weekly drop since the market reopened soon after the Sept. 11 terrorist attacks.
“If individual companies like GE and Dell report good news they will be rewarded, but the market overall is in a ‘show me’ mood,” said Subodh Kumar, strategist at CIBC World Markets in New York. “Emotion is running high against stocks right now.”
GE gained $1.25 to $28.60 and Dell climbed $1.10 to $25.03 in Friday’s trading after both companies issued upbeat sales forecasts, but they provided little tailwind for the rest of the market.
The Dow dropped 117 points, or 1.3%, to 8,684.53, and the S&P; 500 lost 5.98 points, or 0.6%, to 921.39. On the bright side, the Dow did recover much of an early 201-point drop.
The battered technology sector held up relatively well, with the Nasdaq composite index dipping 0.93 point, or 0.1%, to 1,373.50. For the week, however, Nasdaq lost 5.2%, its biggest drubbing since April.
In Friday’s trading, losers topped winners by more than 4 to 3 on the New York Stock Exchange and by 9 to 8 on Nasdaq. Volume was moderate.
The day’s declines left the S&P; 500 and Nasdaq hovering near the five-year lows they reached Wednesday, while the Dow is only about a 5% drop from the multiyear low it set in September.
The S&P; 500 is now down 39.7% from its March 2000 peak, while Nasdaq is off 72.8% from the high it hit that same month. The Dow, which peaked in January 2000, is down 25.6% from its high point.
The revenue guidance from GE and Dell was the sort of optimism many analysts say they have been watching for. But traders apparently focused instead on the surprisingly steep decline in consumer confidence as reported in the University of Michigan’s latest monthly survey.
The consumer sentiment index posted its biggest drop this month since September, sliding to 86.5 from 92.4 in June. The survey also overshadowed a report from the Commerce Department showing a 1.1% rise in consumer sales last month.
Retailer Home Depot weighed on the Dow, slipping $2.31 to $29.09 after Merrill Lynch downgraded the stock, citing sluggish sales and stiff competition.
Dow member Procter & Gamble added to the downdraft, losing $2.32 to $83.63 amid rumors that regulators were examining its accounting practices. After the market closed, the company called the speculation unfounded.
Utility Duke Energy added to the growing concerns about corporate credibility, slumping $3.20 to $24.75 after saying it was subpoenaed by federal agencies seeking documents relating to its power trading. After markets closed, gas pipeline operator El Paso disclosed receiving a subpoena as well. Its stock, which lost 35 cents to $17.75, fell to $16.70 in after-hours trading.
With the stock market’s historically sluggish summer trading season off to a weak start, Wall Street is seeking the elusive catalyst for a meaningful new rally.
Strategists say investors may stay in a foul mood until they see progress on two fronts: the corporate governance reform efforts underway in Washington and clearer signs of a pickup in company profits.
“Capitol Hill and the administration need to come together on the corporate ethics issue. If it looks like everyone is just playing politics, the market won’t like that,” Kumar said. “Secondly, more companies need to report actual improvement in revenue, operating margins and earnings.”
Among other highlights Friday:
* In the Treasury market, the benchmark 10-year note wrapped up its strongest week in 3 1/2 years, rallying as investors sought safety in government bonds. Its yield eased to 4.57% from 4.64% on Thursday.
* In currency trading, the U.S. dollar extended its slide against the yen, falling to 116.79 yen from 116.81 on Thursday.
* Elsewhere in the retail stock sector, Wal-Mart sank $1.33 to $52.85 and Kohl’s fell $2.21 to $66.99.
Market Roundup, C4-5
