Stocks Are Flat as Consumer Confidence Falls
Stocks drifted in a narrow range Tuesday, as neither a reported plunge in consumer confidence nor Federal Reserve Chairman Alan Greenspan’s reassurance about the economy’s “flexibility” provided significant motivation for investors.
The Dow industrials ended with a sliver of a gain, up 12.58 points, or 0.1%, to 10,456.21.
Crude oil futures prices pulled back, but gasoline and natural gas futures rose. Bond yields were little changed, and the dollar strengthened.
Sellers dominated on Wall Street early in the session, after the Conference Board said its index of consumer confidence plunged to 86.6 this month from 105.5 in August.
A sharp decline had been anticipated in the aftermath of Hurricane Katrina, which sent energy prices soaring early in the month.
Later in the day, Greenspan’s comments to a meeting of the National Assn. for Business Economics may have helped to spur modest buying, analysts said.
Greenspan, speaking via satellite, focused on the virtues of deregulation and the flexibility of the U.S. economy. He said the latter quality had helped the nation weather several shocks in recent years, including higher energy prices.
“It seemed like [he] was attempting it to be kind of a pep rally, saying that the economy and its flexibility can absorb shocks,” said Greg Church, a principal at Church Capital Management in Yardley, Pa.
But the Fed chief, who will retire in January, also echoed warnings he has issued over the last year about complacency on the part of investors in their assessment of risk in certain markets.
“A decline in perceived risk is often self-reinforcing in that it encourages presumptions of prolonged stability,” Greenspan said, in comments that analysts said were aimed at the high-flying housing market and at the bond market.
Asset bubbles fueled by “exuberance” invariably burst and policymakers cannot safely pierce them, Greenspan said.
Earlier this year Greenspan declared that it was a “conundrum” why long-term interest rates, such as on Treasury bonds, had declined even as the central bank has been raising short-term rates since mid-2004.
Some analysts say investors have been too willing to accept relatively low yields on bonds, and that the market could be shocked if the Fed lifted its key short-term rate much higher than many bond investors have anticipated.
Worries about a sharp economic slowdown drove Treasury bond yields lower immediately after Katrina hit, but yields have been inching higher for three weeks. On Tuesday the benchmark 10-year T-note yield ended at 4.28%, down from 4.29% on Monday, which was the highest since Aug. 11.
In the stock market, losers outnumbered winners by narrow margins on the New York Stock Exchange and on Nasdaq.
The Standard & Poor’s 500 index was virtually unchanged, up 0.03 point to 1,215.66. The Nasdaq composite eased 5.04 points, or 0.2%, to 2,116.42.
With three trading days to go in the third quarter, the S&P; 500 is up 0.3% year to date, while Nasdaq is down 2.7% and the Dow is off 3%.
In commodities trading, near-term crude oil futures lost 75 cents to $65.07 a barrel. But gasoline futures gained 3.72 cents to $2.166 a gallon -- a three-week high -- on speculation that there may be prolonged fuel shortages because of hurricane damage to refineries.
In currency trading, the dollar rose to its highest level in more than a year against the yen. It ended at 113.32 yen in New York, up from 112.32 on Monday, as some traders bet the Fed would continue to lift U.S. interest rates, which could underpin the dollar’s value. The buck also gained against the euro.
Among the day’s market highlights:
* Some investors pulled back from semiconductor stocks after a JPMorgan Chase analyst made negative comments about the sector. Texas Instruments lost 85 cents to $32.92, Intel eased 39 cents to $23.83, and International Rectifier was down 89 cents to $44.62.
* Chinese Internet-related shares also were weak. Baidu.com slid $4.78 to $72.50 and Netease.com fell $3.79 to $87.97.
* Shares of companies that might benefit from increased U.S. infrastructure spending attracted buyers. Florida Rock Industries jumped $2.90 to $62.45, Eagle Materials gained $1.70 to $119.20, and Jacobs Engineering rallied $2.24 to a record $66.
* Genentech sank $2.69 to $79.86. A company patent covering production of antibody drugs was rejected by the U.S. patent office. Genentech said the ruling was routine and that it would respond within 60 days.
Also in the biotech sector, Affymetrix rose 41 cents to $42.46 in regular trading, but after the session the company said third-quarter sales would fall short of expectations. The stock sank to $38.13 after hours. Affymetrix makes systems that analyze genetic information.
