After a strong start, stocks post small gains
Wall Street ended a bumpy session slightly higher Wednesday after falling oil prices hurt energy stocks and overshadowed a stronger-than-expected productivity reading. A Federal Reserve official’s comments on interest rates also soured the market’s early good mood.
A robust sales forecast from Cisco Systems gave a boost to technology stocks, however. The Labor Department’s productivity figures for the fourth quarter were nearly double what had been expected, but they failed to offset concerns about falling oil prices.
The productivity data initially seemed to overshadow comments from Philadelphia Fed President Charles Plosser that an improving economy might force the central bank to raise short-term interest rates. Plosser said the productivity gains were helping consumers but it was too soon to declare the threat of inflation neutralized.
Despite indecision reflected in the Dow Jones industrials, which were up for much of the day but ended essentially flat, stocks rose moderately overall. Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange.
The Dow inched up 0.56 of a point, a negligible change, to 12,666.87. The Dow moved past 12,700 for the first time, trading as high as 12,700.28. The previous trading record of 12,683.93 was set Friday.
Broader stock indicators showed more substantive gains. The Standard & Poor’s 500 index rose 2.02 points, or 0.1%, to 1,450.02, and the tech-focused Nasdaq composite index, responding to Cisco’s news, rose 19.01 points, or 0.8%, to 2,490.50.
U.S. Treasury yields fell amid a fairly well-received auction of new 10-year notes and a benign reading of wage inflation. Results for the $13-billion sale, while not spectacular, were enough to support the market in the wake of bond-friendly figures on jobs and manufacturing last week.
The yield on existing 10-year notes fell to 4.73%, from 4.77% on Tuesday. The new 10-year notes were sold at a high yield of 4.74% and found bids for 2.41 times the amount of debt on offer, above the 2006 average of 2.32.
Indirect bidders, which include customers of primary dealers but also foreign central banks, gobbled up $3.89 billion, or nearly 30% of the sale, not far below last year’s average.
Crude oil futures fell $1.17 to $57.71 a barrel in New York trading.
Investors found encouragement in the productivity data because it suggested that employers could extract more work from employees and stave off the need to add workers in a tight labor market. Productivity grew at a 3% annual rate, and the Labor Department also reported that wage pressures eased somewhat in the last three months of the year. Employers forced to compete for workers probably would have to raise pay and other benefits. Such a prospect would draw concern on Wall Street as the Fed remains watchful of an increase in wage inflation.
Last week, the Fed left interest rates unchanged for the fifth straight time, interrupting a string of 17 consecutive increases than began in 2004. In comments accompanying the decision, the Fed said inflationary pressures appeared to be in check but were still a concern. After an initial burst higher following the comments on inflation, stocks have shown little movement as bullish investors try to gather the resolve to move higher.
Al Goldman, chief market strategist at A.G. Edwards & Sons, said Wednesday’s trading reflected “a normal pause” and, more specifically, a pullback in the energy companies. “The price of oil dropped dramatically, and they tend to be major factors overall,” he said of the energy companies. Still, he remains confident in the market’s prospects. “We’ve come a long way and we’re just taking a timeout.”
In other market highlights:
* Cisco rose 81 cents to $28.09 after the company, which makes networking equipment, predicted that its third-quarter revenue would rise 19% to 20%. Rival Juniper Networks rose 58 cents to $19.21.
* Shares of Irvine-based Broadcom had their biggest gain in two months after Morgan Stanley upgraded the maker of chips for consumer devices to “outperform” from “equal-weight” on expectations that earnings would improve this year. Broadcom added $1.51, to $31.50.
