Stocks Shrug Off Economic Data
Stocks wobbled in and out of positive territory Wednesday, settling near Tuesday’s closes as the market shrugged off a pair of economic reports that suggested continued strength in the recovery.
A surge in manufacturing activity and better-than-expected data on housing construction failed to impress investors preoccupied with two events expected at the end of the month: an interest rate hike and the handover of political power in Iraq. Analysts say the market is likely to lurch sideways as investors wait to see what will happen.
“I think for the next several weeks, we’re not likely to see major directional moves,” said Jack Caffrey, equities strategist with J.P. Morgan Private Bank. “We’re more likely to see a few days up and a few days down. It’s going to be frustrating. But there will be some opportunities created, both to buy and to sell.”
The Dow Jones industrial average closed down 0.85 point, or 0.01%, at 10,379.58.
The broader gauges also finished narrowly higher. The Nasdaq composite index gained 2.63 points, or 0.1%, to 1,998.23. The Standard & Poor’s 500 index added 1.55 points, or 0.1%, to 1,133.56.
There was fresh evidence that the recovery of manufacturers was on track, as the Federal Reserve reported a 1.1% rise in big industry production for May, the strongest showing in nearly six years. The advance well outpaced the 0.6% rise forecast by economists.
Separately, the Commerce Department reported that builders broke ground on fewer housing projects in May, but the level of activity was still brisk enough to exceed expectations. Total housing permits -- a good barometer of current demand -- were up 3.5% to 2.08 million units, the highest level in more than three decades.
The batch of solid economic data pushed yields on U.S. Treasuries higher, as traders bet that rate hikes were on the way.
On Tuesday, subdued core inflation and a benign statement from Federal Reserve Chairman Alan Greenspan on price trends caused Treasury prices to zoom higher and their yields to plummet. (Bond yields and prices move in opposite directions.) In the aftermath of Tuesday’s big moves, analysts expected bonds to settle into a relatively narrow range until the next major event for the market -- the Fed’s policy-setting meeting at the end of June.
The yield on the benchmark 10-year note rose Wednesday to 4.72%. The yield had dived Tuesday to 4.68%, down from 4.87% a day earlier, for the biggest one-day drop since 2001.
Concern over oil prices was renewed after a sabotage attack in Iraq forced a suspension of the country’s exports of oil via the Gulf. The Organization of the Petroleum Exporting Countries indicated its members would make up for any shortfall in Iraqi crude, however, and oil for July delivery rose just 13 cents, to $37.32 a barrel, in New York trading.
Even so, analysts fear that additional attacks on Iraq’s vulnerable oil infrastructure -- and a damaging spike in crude prices -- could lie ahead as the U.S.-led coalition prepares to hand over political power to Iraqis on June 30.
On Wall Street, an index of energy shares advanced 1.8%, the biggest gain among the S&P; 500’s 10 industry groups.
Schlumberger, the world’s No. 2 oil-field services provider, added $2.31 to $62.23. Exxon Mobil advanced 65 cents to $44.73 and Halliburton rose 97 cents to $30.35.
Drilling shares also advanced. Nabors Industries added $1.60 to $44.30. Transocean rose 67 cents to $27.36 and Noble climbed 75 cents to $36.02.
“This is a realization that oil prices are not going back to below $30 a barrel any time soon,” said Joseph Veranth, who helps oversee $2 billion at Dana Investment Advisors in Brookfield, Wis. “If oil is going to be in this $32-$38 range, then these companies are going to be highly profitable.”
Among other market highlights Wednesday:
* Callaway Golf of Carlsbad, Calif., slid $3.08 to $11.86. Callaway said it no longer expected to reach its forecast for 2004 profit of 82 cents to 97 cents a share on sales of $1 billion to $1.06 billion.
* Oracle, the Redwood City, Calif., software maker, dropped 36 cents to $11.35, a day after posting its sixth straight quarter of double-digit earnings growth. The results beat analysts’ per-share expectations by a penny, but there was disappointment over a dip in Oracle’s licensing of business applications software.
* Delta Air Lines slumped 24 cents to $5.71, after it said it expected jet fuel costs to rise $670 million, or 35%, from last year.
* International Game Technology rose $1.38 to $34.83. The world’s largest maker of slot machines said it would buy back its senior notes due in May 2009. Three banks are arranging a $1-billion credit facility for the company, allowing it to make acquisitions, raise its dividend or repurchase shares, a Deutsche Bank analyst wrote.
Advancing shares outnumbered decliners about 4 to 3 on the New York Stock Exchange.
