Stocks Are Mixed; Bond Yields Fall
Stocks were mixed Thursday as a cautious sales forecast from Wal-Mart Stores tempered investors’ hopes for a robust holiday shopping season.
Wal-Mart’s chief executive, Lee Scott, said holiday spending should be better in 2003 than last year’s dismal performance, but he added that customers still are buying the cheapest items -- a sign household budgets remain tight.
The comments cast some doubt on the ability of the American consumer -- whose spending accounts for two-thirds of U.S. economic activity -- to continue driving the fledgling economic recovery.
Stocks also fell on a government report showing a bigger-than-expected increase in the number of people continuing to collect jobless benefits.
The day’s losses were limited by an analyst’s upbeat comments that hoisted drug stocks such as Merck sharply higher.
The Dow Jones industrial average fell 10.89 points, or 0.1%, to 9,837.94; the Standard & Poor’s 500 index slipped a fraction of a point to 1,058.41; and the technology-laced Nasdaq composite index fell 5.76 points, or 0.3%, to 1,967.35.
Winners led losers by almost 4 to 3 on the New York Stock Exchange, and were about even on Nasdaq. Trading volume was moderate.
Wal-Mart’s fiscal third-quarter profit and its forecast for fiscal fourth-quarter profit just missed Wall Street expectations. It was the Dow’s biggest loser, falling $2.44 to $55.52. The Dow’s other major retailer, Home Depot, fell 62 cents to $36.32.
Wal-Mart’s forecast “could serve as a cautionary note about expectations getting too far ahead of what companies can actually deliver,” said Chris Wolfe, head of equities at J.P. Morgan’s private bank.
On the upside, drug shares got a lift from a research report by Deutsche Bank saying the sector is poised for a rally after underperforming for three years. Dow component Merck rose $1.55 to $45.80 and Pfizer gained $1.05 to $33.45.
The American Stock Exchange’s index of drug stocks surged nearly 3%.
Bond yields fell after a Federal Reserve official said interest rates could stay low well into 2004. Prices were boosted by a strong showing in the final leg of the quarterly Treasury refunding, at which $17 billion in 10-year notes was sold at a yield of 4.36%. The yield on the benchmark 10-year T-note closed at 4.29%, down from Wednesday’s close of 4.40%.
In other trading, gold eased off 7 1/2-year highs after failing to reach $400 an ounce. Gold for December delivery fell 80 cents to $394.10 in New York trading.
Oil futures gained for a fifth straight session, adding 57 cents to $31.90 a barrel in New York.
In other highlights:
* Level 3 Communications lost 37 cents to $5.26. Warren E. Buffett’s Berkshire Hathaway cut its Level 3 stake to 1.6 million shares from 19.9 million, according to a Securities and Exchange Commission filing.
* Whole Foods Market, the top U.S. natural-foods grocer, jumped $5.95 to $64.68. Fourth-quarter profit rose 8% after it added stores and lowered costs, and the company boosted this year’s earnings forecast.
* Many technology shares climbed in trading before exchanges opened after Applied Materials said orders for its computer-chip production machines are rising. The gains faded after the jobless claims report. Applied Materials ended down 70 cents at $24.74.
* Georgia-Pacific dropped $1.19 to $25.81. Its 4.4% decline was the day’s second-biggest in the S&P; 500. Advertising costs and competition will keep profit from the company’s tissue business from rising, Credit Suisse First Boston said while cutting its rating on the stock to “underperform” from “neutral.”
