Stocks End Short Week Lower
A late-session sell-off kept stocks narrowly mixed Thursday as cautious investors took what little profits they could from a disappointing week marked by an interest rate hike and inflation concerns. All three major indexes saw their third straight week of losses.
Economic data pointing to modest growth gave investors enough courage to find bargains after the week’s sell-off. With orders for durable goods -- those made to last more than three years -- rising by just 0.3% in February, investors felt that demand was sluggish enough to forestall rising prices.
But the last hour of trading saw a pullback in an already weak relief rally, prompted in part by rising crude oil prices. The markets will be closed today for the Good Friday holiday.
Analysts said many investors remained skeptical that the Federal Reserve’s interest rate hikes would stem inflation without damaging the economy.
“The market was in a severely oversold condition because of all these inflation fears,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. “But I still think there’s a bumpy road ahead for a while. The market really needs assurances that the Fed will be able to keep ahead of inflation.”
The Dow Jones industrial average fell 13.15 points, or 0.13%, to 10,442.87.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index was down 1.11 points, or 0.09%, at 1,171.42, while Nasdaq climbed 0.84 point, or 0.04%, to 1,991.06 as investors returned to the heavily oversold technology sector.
The stock market tumbled to its third straight week of losses after the Federal Reserve on Tuesday confirmed that inflationary pressures were building within the economy. Many on Wall Street now believe that higher interest rate hikes, beyond the customary quarter-percentage-point increases since the summer, could be coming as early as May.
For the week, the Dow lost 1.76%, the S&P; 500 fell 1.53% and Nasdaq slid 0.83%.
Crude oil staged a recovery Thursday after oil prices dropped 4% earlier in the week. A barrel of light crude settled at $54.84, up $1.03 on the New York Mercantile Exchange. The bond market was flat, with the yield on the benchmark 10-year note unchanged at 4.59%.
With inflation fears confirmed by the Federal Reserve this week, Wall Street will be looking out for economic data to show that the economy will grow at a slow enough pace to forestall inflation but fast enough to bolster corporate earnings reports. First-quarter earnings reports will begin coming in during the second week of April.
“If you look at the data, the economy is doing just fine, and we expect that to continue,” said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. “But you see a market that’s been sold off dramatically. The key is interest rates, in that hopefully they will strengthen the dollar without causing too much harm to all the debt that companies and consumers have out there.”
The S&P; 500 reached an all-time high of 1,527.46 five years ago Thursday. The benchmark would have to climb 30% to reach that level, even after rallying since October 2002. Nasdaq would have to more than double to return to its all-time high on March 10, 2000.
In other market highlights:
* Kmart Holding gained $7.69 to $132.52 after its shareholders approved the $12.3-billion acquisition of Sears Roebuck in a bid to stem declining sales and fend off Wal-Mart Stores. The combined company, called Sears Holding Corp., will fire an unspecified number of employees.
Sears had the worst performance in the S&P; 500, tumbling $6.76, or 12%, to $50.04. Sears investors sold shares because only 55% of them will be exchanged for Kmart stock and demand for the shares is expected to exceed supply, Sears said in a statement.
Wal-Mart rose a penny to $50.66.
* Yum Brands, operator of the Taco Bell, Pizza Hut and KFC restaurant chains, climbed $1.72 to $52.32. The company boosted its first-quarter earnings forecast to as much as 52 cents a share, helped by sales gains for KFC in China. The average analyst estimate in a Thomson First Call survey was 51 cents.
Darden Restaurants, whose chains include Red Lobster and the Olive Garden, gained $2.63 to $30. Its 9.6% jump was the largest in the S&P; 500. The company said fiscal 2005 net income would be as much as $1.78 a share. Analysts in a Thomson First Call survey had expected $1.69 on average.
Calabasas Hills-based Cheesecake Factory rose 97 cents to $35.19.
* Celanese jumped $1.19 to $18.09. The world’s largest producer of acetyls used in paints and plastics said first-quarter profit, excluding some items, would be as much as 40% more than last year’s $208 million. The company’s previous forecast was for an increase of as much as 30%.
* Yahoo rose 54 cents to $31.41 after saying it would buy back as much as $3 billion, or 7%, of its stock over the next five years. As of March 4, Yahoo had 1.4 billion shares outstanding.
The buyback represents about 97 million shares. Companies use buybacks to increase earnings per share by reducing shares outstanding.
