An erratic session, week
Stocks finished an erratic week with a mixed session Friday after a government report of a steep decline in new-home sales stirred concerns that weakness in housing would continue to dog the economy. The major indexes lost ground for the week.
Major stock indexes, which fell more than 1% on Thursday after unwelcome economic readings and the assassination of Pakistani opposition leader Benazir Bhutto, fluctuated throughout the day Friday.
The Dow Jones industrial average edged up 6.26 points to 13,365.87.
Broader stock indicators were mixed. The Standard & Poor’s 500 index rose 2.12 points, or 0.1%, to 1,478.49, and the Nasdaq composite index fell 2.33 points, or 0.1%, to 2,674.46.
The Russell 2,000 index of smaller-company stocks fell 1.75 points, or 0.2%, to 771.76.
For the week, the Dow lost 0.6%, the S&P; 500 slid 0.4%, the Nasdaq fell 0.7% and the Russell 2,000 sank 1.8%.
Despite months of volatile trading that has seen stocks surge and then backslide, the indexes are going into the final trading session of 2007 with decent gains for the year: The Dow is up 7.2% year to date, the S&P; 500 is up 4.2% and the Nasdaq is up 10.7%.
This week saw the kind of choppy trading that has become typical in the stock market. Wall Street was lifted Monday by news of a $6.2-billion investment in Merrill Lynch, a welcome development given the financial sector’s continuing problems stemming from the mortgage and credit crisis.
But by Thursday those gains were gone, wiped out as world political events reminded investors of the problems that still exist beyond the economic uncertainties in the U.S.
Advancing issues narrowly outnumbered decliners Friday on the New York Stock Exchange. Volume remained light.
Treasury yields slid as the report on new-home sales exacerbated recession fears. The yield on the 10-year T-note fell to 4.08% from 4.2% late Thursday. The dollar was lower against most other major currencies while gold prices rose.
Oil prices slipped. Crude futures dropped 62 cents to settle at $96 a barrel on the New York Mercantile Exchange.
Natural gas futures, however, jumped 18.6 cents, or 2.6%, to $7.386 per million British thermal units, pushing up stocks of gas producers. Exxon Mobil climbed $1.33, or 1.4%, to $95. ConocoPhillips, the largest U.S. natural gas producer, rose 48 cents to $89.13, a three-month high.
Shares of home builders stumbled after the Commerce Department reported that the number of new homes sold in the U.S. plunged 9% last month from October on a seasonally adjusted basis to the lowest level in more than 12 years. The figure was below the most pessimistic forecast in a Bloomberg survey.
“The market has been slow to grasp just how bad things were going to be for housing,” said Doug Peta, market strategist at J. & W. Seligman & Co. in New York.
D.R. Horton slumped 56 cents, or 4.1%, to $13.10. Centex fell 75 cents, or 2.9%, to $24.97. KB Home dropped $1.01, or 4.6%, to $21.08.
The housing data helped push financial shares down 0.5% for their third consecutive retreat. The decline came despite increased bets in the interest-rate futures market that the Federal Reserve would lower interest rates at its next two meetings. The perceived odds of a quarter-point cut Jan. 30 increased to 90% from 76%, and the chance of a reduction March 18 rose to 58% from 44%.
Citigroup fell 27 cents to a five-year low of $29.29. Fannie Mae dropped $1.27, or 3.2%, to $38.34.
Bond insurers MBIA and Ambac Financial Group declined the most in the S&P; 500 on news that Berkshire Hathaway, led by billionaire investor Warren Buffett, had started a rival company that would insure only municipal bonds. MBIA and Ambac, which began as municipal bond insurers, are struggling to maintain the AAA credit ratings that allow them to do business after downgrades of mortgage-related securities they also guarantee.
MBIA sank $3.53, or 16%, to $18.74, and Ambac fell $4.02, or 14%, to $25.12. Both stocks are down more than 70% this year.
In a separate move, Berkshire Hathaway said it agreed to buy the reinsurance unit of ING Group for $436 million in cash. Berkshire’s shares climbed $3,300, or 2.4%, to $141,100.
In other market highlights:
Footwear retailer Genesco jumped $5.44, or 16%, to $38.50 after a judge ruled that Finish Line could not back out of a deal to acquire Genesco for $54.50 a share, or $1.5 billion. Shares of Finish Line, which sells athletic apparel, plunged 75 cents, or 25%, to $2.30.
MGM Mirage rose 81 cents to $85.06 after the investment arm of the Dubai government boosted its stake in the casino operator to 6.5%.
Security device maker Checkpoint Systems surged $3.89, or 17%, to $26.60. Strong sales worldwide led the company to issue a 2008 profit forecast above Wall Street expectations.
Overseas, key indexes fell 1.7% in Japan and 0.3% in Britain. Shares rose 0.4% in Germany and were essentially flat in France.
