Stocks Finish Mixed Amid Inflation Fears
Wall Street closed mixed Thursday, with blue chips falling and technology stocks managing a slight gain while investors tussled with concerns about inflation and the overall health of the economy.
Lower oil prices that have helped drive stock rallies in recent days remained a bright spot, but another drop in crude Thursday wasn’t enough to offset investor concerns about inflation ahead of next week’s Federal Reserve meeting. Investors grew uneasy after the Labor Department reported that import prices rose a larger-than-expected 0.8% in August.
The Commerce Department said retail sales rose an anemic 0.2% last month, and although Wall Street expected a decline, some investors worried that consumer spending was losing momentum. The modest increase in retail sales followed a 1.4% rise in July.
Thursday’s relatively quiet session wasn’t a surprise after sharp rallies earlier in the week -- the gains were actually a little unexpected for some market watchers.
“Everyone knew you couldn’t make money in September,” said Richard E. Cripps, chief market strategist with Stifel Nicolaus. He contends that some investors who regard September as a consistently weak month for the markets and perhaps an indicator of how Wall Street will finish the year have been caught off guard by the recent rally. But Thursday’s decline was quite muted.
Oil prices fell even after the federal government reported a drop in crude inventories. Crude futures fell 75 cents to $63.22 a barrel in New York trading.
Natural gas futures for October fell to their lowest level in two years after the Energy Department released figures showing that stores of natural gas were much larger than expected.
The Dow Jones industrial average fell 15.93 points, or 0.1%, to 11,527.39.
Broader stock indicators were mixed. The Standard & Poor’s 500 index was down 1.79 points, or 0.1%, to 1,316.28 while the technology-heavy Nasdaq composite index gained 1.06 points to 2,228.73.
Bond yields rose, with the yield on the 10-year U.S. Treasury note rising to 4.79% from 4.76% on Wednesday. Bond yields rise as their prices fall. Analysts said that bonds had begun to look pricey, resulting in a modest sell-off ahead of today’s consumer price index report.
Wall Street is looking to the report with hopes that the key measure of inflation will provide insight into how the Fed might act at its meeting Wednesday. The central bank took a break last month and didn’t raise interest rates after doing so 17 straight times over two years as it sought to contain inflation.
Cripps said that although many investors seem to think the Fed won’t adjust rates, Wall Street might be feeling somewhat uneasy as the meeting approaches.
“You have a lot of uncomfortable sideliners at the moment,” he said, adding that if the Fed leaves rates unchanged, investors who have been biding their time until the meeting could reenter the market, potentially prompting another rally.
John C. Forelli, portfolio manager for Independence Investment, believes that the run-up will be short-lived and that the rally had more to do with the market being oversold at the start of the week than with a strengthening of fundamentals.
“I think it’s too early to declare victory. We don’t think anything has really changed. We continue to think investors will worry about the twin terrors of inflation and a slowing economy,” he said.
In other market highlights:
* Declines in oil and natural gas prices sent energy shares lower. A measure of energy stocks slid 1.7% for the biggest decline among the 10 industry groups in the S&P; 500.
Exxon Mobil slipped 65 cents to $64.71 and Chevron lost 34 cents to $62.05.
DuPont had the steepest gain in the Dow average, rising 93 cents, or 2.3%, to $41.43. Lower oil prices reduce costs at the giant chemical manufacturer.
* A string of strong profit reports this week from investment banks continued as Bear Stearns reported better-than-expected results. Reports from Goldman Sachs Group and Lehman Bros. Holdings helped drive stocks higher in previous days. Bear Stearns was up $3.46 at $139.68. Lehman rose $1.98, to $72.04, and Goldman Sachs rose $1.66 to $162.52.
* Shares of Corona-based Hansen Natural jumped $3.62 to $33.38 after Goldman Sachs added the maker of Monster Energy and Lost Energy drinks to its “conviction buy” list. Hansen shares had dropped almost 40% since June on concern that Hansen’s plans to change distribution of its energy drinks to Anheuser-Busch wholesalers might hurt sales, Goldman said in a research note. But the note said that it probably would be a short-term disruption, and that shares could soar to $55 within a year.
