Less-eager consumers give investors pause
Mixed signals about Americans’ buying power ahead of the holiday shopping season left stocks little changed Wednesday, although strong earnings from Dell sent tech stocks climbing.
Dell’s results suggested to investors that demand for computers is high, but a dip in the University of Michigan’s consumer sentiment survey made some on Wall Street wary that people might be more careful about spending as holiday shopping begins. The damage from the survey was muted, however, by falling oil prices.
After several weeks of record highs in the Dow Jones industrials, largely in response to cheaper oil, big acquisitions and strong company earnings, any signs of sagging spending during the holidays could act as the stock market’s wake-up call to a slowing economy. Consumer spending accounts for about two-thirds of economic activity.
“These stocks have had such strong moves -- if you hear of any kind of weakness, that [retail] sales weren’t as good as anticipated, I think the stocks will get hit a bit here,” said Prudential Equity Group strategist Steven DeSanctis.
The Dow rose 5.36 points to 12,326.95, after slipping from a new trading high of 12,361 earlier.
Broader stock indicators were also higher. The Standard & Poor’s 500 index closed up 3.28 points, or 0.2%, to 1,406.09, and the technology-heavy Nasdaq composite index rose 11.14, or 0.5%, to 2,465.98.
Stocks have slowed their upward movement this week in light pre-Thanksgiving trading volume. U.S. stock markets are closed today for Thanksgiving and open Friday for an abbreviated session.
The Michigan index of consumer sentiment fell to 92.1 this month from October’s 93.6. The reading was higher than the average over the last five months but below analysts’ expectations.
Meanwhile, the Labor Department’s jobless claims data raised concerns that Americans’ shopping resolve might weaken going into the holidays if they’re worried about job security.
The department said new applications for unemployment benefits rose last week a seasonally adjusted 12,000 to 321,000. The more stable four-week moving average of claims, while high, is about the same as a year ago.
Light sweet crude fell 93 cents to settle at $59.24 a barrel in New York trading, after the government said in its weekly petroleum inventory report that U.S. crude inventories climbed by 5.1 million barrels.
Gasoline inventories also rose, while distillate inventories, which include heating oil and diesel fuel, fell.
The yield on the benchmark 10-year Treasury note slipped to 4.56% from 4.57% on Tuesday. The dollar fell against other major currencies, while gold prices edged slightly higher.
In other market highlights:
* Dell surged $2.31, or 9.3%, to $27.13. The second-largest computer maker after Hewlett-Packard reported preliminary earnings of $677 million, or 30 cents a share, in the latest quarter, up from the same quarter a year ago. It was a bright spot for the company, whose accounting and financial reporting is being investigated by the federal government.
“With all the negative news associated with Dell up until this, investors are feeling a little bit better,” said Sam Stovall, chief investment strategist of U.S. equity research at Standard & Poor’s. HP dropped 27 cents to $39.72.
* Tech stocks were boosted as well by news that IBM and Cray will each receive contract extensions worth more than $200 million from the Defense Department to develop a new supercomputer.
Cray rose $1.70, or 17.1%, to $11.62, and IBM rose 44 cents to $93.52.
* General Motors fell after shareholder Kirk Kerkorian decided to reduce his stake in the automaker to 7.4% from nearly 10%. GM dropped $1.52, or 4.7%, to $31.09.
* Among retailers, J. Crew Group rose $5.17, or 14.6%, to $40.52 after the clothing retailer swung to a third-quarter profit on strong sales. BJ’s Wholesale Club rose $2.95, or 10%, to $32.48 after Chief Executive Mike Wedge agreed to resign, sparking takeover rumors.
* Alcoa increased $1.24 to $30.43. The company said it will close metal plants and may get rid of as much as 5% of the workforce after some units failed to meet profit goals. Fourth-quarter costs related to the restructuring will be $375 million to $425 million, Alcoa said.
Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange, where consolidated volume came to 2.29 billion shares, down from Tuesday’s 2.62 billion shares.
The Russell 2,000 index of smaller companies rose 0.74 of a point, or 0.1% to 792.91.
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Bloomberg News contributed to this report.
