Stocks Slip Despite Upbeat Signs
Stocks ended mostly lower Thursday, unable to build on the gains of the previous two sessions despite some positive economic reports and a pullback in energy prices.
The dollar plunged against the yen for a second day, to a seven-week low, in what traders described as a rapid unwinding of speculative bets made against the Japanese currency.
On Wall Street, most key indexes were little changed. The Dow Jones industrial average slipped 1.84 points, or 0.02%, to 10,881.67.
The Standard & Poor’s 500 index, which hit a fresh 4 1/2 -year high on Wednesday, eased 1.80 points, or 0.1%, to 1,270.94. The Nasdaq composite lost 1.96 points, or 0.1%, to 2,260.63.
Losses were heavier among smaller stocks, which have been leading the market this year. An S&P; index of 600 small stocks slumped 1.1% after reaching a record high on Wednesday.
Losers outnumbered winners by more than 3 to 2 on the New York Stock Exchange.
The day’s economic news generally was encouraging. U.S. factory output posted a strong increase last month, the Federal Reserve reported. And consumer prices in November tumbled as gasoline costs fell. Core inflation -- excluding food and energy -- was up 0.2%, in line with expectations.
What’s more, the Treasury reported that foreign investors increased their net holdings of U.S. financial assets by a record $106.8 billion in October, damping concerns about the nation’s ability to fund its record trade deficit.
Still, some analysts said investors were worried that continued strength in the economy could mean the Fed would tighten credit in 2006 beyond the 4.75% peak that many experts predict for the central bank’s key short-term interest rate.
The Fed on Tuesday lifted its rate from 4% to 4.25% and hinted that it might be near the end of its rate-raising campaign.
In the stock market, there is “lingering fear that the Fed is not going to stop” soon, said James Swanson, chief investment strategist at MFS Investment Management in Boston.
The Treasury bond market, however, was calm on Thursday. The yield on the 10-year T-note was unchanged at 4.46%.
The day’s hot action was in currency markets. The dollar plummeted against the yen, to 116.29 yen in New York from 117.42 on Wednesday. The dollar has tumbled from a two-year high of 121 yen last week.
Speculators, such as hedge funds, have been heavily borrowing the yen at almost no cost and selling it in so-called carry trades to buy higher-yielding currencies such as the U.S., Australian and New Zealand dollars.
“The market is testing how far this unwinding of carry trades will go,” said Nobuo Ibaraki, foreign exchange manager at Nomura Trust and Banking. “It will take about one to two weeks to find a bottom.”
In commodity markets, near-term crude oil futures sank 86 cents to $59.99 a barrel in New York. Natural gas prices, which hit a record high Tuesday, also continued to pull back.
Gold fell for a third session, losing $2.60 to $503.90 an ounce in New York futures trading.
In other market highlights:
* Altria jumped $2.89 to a record $76.62 for the top gain in the Dow index. The Illinois Supreme Court ruled that its Philip Morris USA unit did not have to pay an award to smokers of “light” cigarettes, who accused the cigarette maker of misleading them about health risks.
* Goldman Sachs Group lost $1.33 to $128.30. Wall Street’s No. 1 trading firm said fiscal fourth quarter rose 37%, but that was below what analysts expected. Bear Stearns, however, soared $6 to $116.50 after saying quarterly profit rose 15%, exceeding analysts’ estimates.
* Biotech giant Amgen surged $3.66 to $80.44 a day after it agreed to acquire Abgenix for $2.2 billion, which will give it full ownership of the colon-cancer drug that it had been developing jointly with Abgenix. Abgenix soared $7.03 to $21.68.
* Edison International, parent of Southern California Edison, rose 14 cents to $46.84. After the market closed the company said it raised its quarterly cash dividend 8%, to 27 cents a share.
