Stocks Drift Lower After Early Rally
Stocks slipped Friday for the third time in four sessions as worries about the U.S. economy and corporate earnings took the shine off surprisingly strong readings on retail sales and consumer sentiment.
The Dow Jones industrial average surged more than 100 points at the opening of trading after retail sales showed that U.S. consumers went on a spending spree in March even as sentiment was hitting decade lows. A rebound in confidence in early April suggested consumption should stay strong enough to steer the economy clear of recession.
“I was also encouraged by the retail figures because, quite frankly, I was thinking the consumer might slow down,” said Subodh Kumar, chief investment strategist at CIBC World Markets in Toronto. But “the focus has shifted toward earnings. The market wants to be cautious ahead of earnings season.”
Indeed, the day’s news from corporate America was less than stellar. Boeing fell 62 cents to $26.47 after warning of $1.2 billion in charges, while Wal-Mart Stores slid $1.60 to $52.98 after it was cut to “hold” from “buy” by Prudential Securities.
Both are members of the Dow, which closed down 17.92 points, or 0.2%, at 8,203.41. The broader Standard & Poor’s 500 index fell 3.28 points, or 0.4%, to 868.30 and the tech-laden Nasdaq composite index slipped 6.76 points, or 0.5%, to 1,358.85.
The number of advancing stocks was almost dead even with decliners on the New York Stock Exchange, while on Nasdaq losers led winners by 8 to 7. It was one of the lightest trading days of the year.
For the week, the Dow fell 0.9%, the S&P; was off 1.2%, and Nasdaq shed 1.8%.
Next week is one of the busiest of the quarterly earnings reporting season, and many companies have warned that results will fall short of estimates. Investors are struggling to determine how much earnings were hurt by uncertainty over the Iraq war and how much profits will pick up once it ends.
“The reality is the economy is not very strong and we haven’t seen consistently strong numbers month over month,” said Stephen Carl, head of U.S. equity trading at Williams Capital Group in New York. “We’re coming into the corporate earnings season, and that has yet to be proven strong as well.”
Before the opening bell, a government report showed U.S. retail sales rebounded with surprising strength in March, well above Wall Street analysts’ expectations and the biggest monthly gain since October 2001.
Separately, the University of Michigan’s preliminary April index of consumer sentiment jumped to 83.2 from 77.6 in March. On a negative note, U.S. wholesale prices shot up in March amid higher energy costs and a surge in car prices, the government said in a report at odds with expectations of much milder inflation.
Oil prices rose Friday, climbing 68 cents to $28.14 a barrel in New York trading, on reports that Iraq’s northern oil fields sustained an undetermined amount of damage before they were seized by allied forces. Analysts said it could be months before Iraq is able to resume significant crude exports.
In other trading, Treasury yields and gold prices rose, and the dollar gained against the euro and the yen.
In other highlights:
* Retailers got little boost from the economic reports. On the Morgan Stanley index of retail stocks, 13 rose Friday and 25 fell. Besides Wal-Mart, big losers included Target, down 97 cents to $30.88, and Talbots, off 88 cents to $27.52.
* GE edged down 2 cents to $27.36 after it said that first-quarter profit fell nearly 9% and that it expected second-quarter earnings to fall as much as 15%.
* Drug maker Andrx gained $1.91 to $14.71 after U.S. regulators approved its generic version of the hypertension drug Tiazac. The decision ended a five-year legal fight against the drug’s original manufacturer.
* Juniper Networks climbed 68 cents to $9.09 after posting a profit, offering a lift to other network gear makers. Rival Cisco Systems climbed 17 cents to $13.21.
Market Roundup, C4-5
