Inflation Fears Still Dog Markets
Wall Street remained mired in uncertainty Thursday, ending an erratic session narrowly mixed as investors’ inflation worries worsened in the face of a sharp jump in import prices.
The government’s report today on the consumer price index for September could spark more volatility, experts warned.
Investors found some encouragement Thursday after the Energy Department reported an increase in the nation’s refining capacity, which had been severely disrupted by hurricanes Katrina and Rita. The nation’s crude oil inventories also rose, sending prices lower. A barrel of light crude fell $1.04, to $63.08 in New York.
But the chronic fretting over inflation dominated trading after the Commerce Department said prices for imported goods rose 2.3% in September -- the biggest increase in 15 years, and far greater than the 0.9% hike economists had forecast.
“We’re definitely at a hard point here, with inflation and interest rates kind of looming over everything,” said Bryan Piskorowski, market analyst at Wachovia Securities.
Still, major stock indexes stabilized after slumping for most of the last two weeks.
The Dow Jones industrial average ended down 0.32 point to 10,216.59, a five-month low.
The Standard & Poor’s 500 index lost 0.84 of a point, or 0.1%, to 1,176.84. But the technology-heavy Nasdaq climbed 9.75 points, or 0.5%, to 2,047.22.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, but winners had a tiny edge on Nasdaq.
U.S. Treasury bond prices slipped Thursday, sending benchmark yields to fresh six-month highs.
Bond yields have been rising since early September as a steady chorus of Federal Reserve officials have made clear they don’t intend to stop raising short-term interest rates soon. This has made it difficult for the bond market to make any sort of convincing comeback.
The yield on the 10-year Treasury note rose to 4.46% from 4.45% on Wednesday.
Inflation worries helped spur strong demand at an auction of $8 billion in 10-year Treasury Inflation Protected Securities, known as TIPS.
The TIPS were sold at a yield of 1.98% and garnered 2.11 times the number of bids per dollar of debt on offer, above an average 2.06 seen in the prior three sales of such a maturity. The notes guarantee a set yield plus compensation for inflation over time.
On Wall Street, the news on import prices, and jitters over today’s consumer-prices report, overshadowed a report on the nation’s trade deficit. The deficit rose to $59 billion in August, up from $58 billion the month before, but less than economists had expected.
Investors also were disappointed by the latest employment picture from the Labor Department. First-time jobless claims fell to 389,000 last week from 391,000 the week before, but economists had predicted 360,000 claims for the week. Continued fallout from Hurricane Katrina was blamed for the high number of people seeking unemployment benefits.
Although the expected raft of corporate earnings reports due next week may not be a panacea for the stock market’s troubles, analysts say strong fourth-quarter profit forecasts could alleviate fears of a falloff in consumer spending heading into the holiday shopping season -- and give stocks a much-needed boost.
“Earnings are the most likely catalyst in the short term,” said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. “The market is very concerned about inflation and the consumer rolling over because of higher prices. If the outlooks call for strong fourth-quarter sales, then you could see something good happen.”
In other market highlights:
* Shares of Apple rebounded $4.49, or 9.1%, to $53.74 for the best performance in the S&P; 500. Shares fell 4.5% Wednesday after the company reported fourth-quarter revenue that trailed analysts’ estimates.
* Google slipped $3.53 to $297.44, a day after reports that it was in talks to acquire a sizable stake in America Online from Time Warner. Time Warner rose a dime to $17.59.
Cable operator Comcast also is involved in the possible deal, according to people familiar with the talks, who say it could lead to Google absorbing AOL’s websites and services and Comcast taking over its Internet service customers. Comcast lost 72 cents to $27.20.
* Impac Mortgage jumped 89 cents to $10.15 after the Southland-based lender said it would buy back as many as five million shares. Lenders’ shares have tumbled in recent months on fears about the housing market.
* McDonald’s added 38 cents to $32.05. The company said third-quarter profit excluding a gain was 56 cents a share, beating the 54-cent average estimate in a Thomson survey.
* Energy shares were the biggest drag on the S&P; 500, losing 2.4% on average. Amerada Hess lost $2.69 to $115.77 and Chevron dropped $1.42 to $59.54.
Energy stocks have retreated 10% this quarter, trimming their year-to-date gain to 26%. That’s still more than double the 9.4% advance posted by utilities, the second-best performers in 2005.
* Polaris Industries, the largest U.S. maker of all-terrain vehicles, lost 70 cents to $45.35. Fourth-quarter per-share profit from continuing operations will be 97 cents to $1.02, the company said. Analysts, on average, expected profit of $1.15, according to Thomson.
* Hospital operator HCA shed 16 cents to $46.53 after the company lowered its quarterly profit forecasts, which HCA blamed on costs related to the Gulf Coast hurricanes and an asset impairment charge. HCA also announced a $2.5-billion stock buyback program.
