Thursday, March 9, 2006

Stocks Fall amid Rate Worries

News Article
March 9, 2006

Business Week Online

Stocks Fall amid Rate Worries

The Bank of Japan scrapped its easy monetary policy, sending overseas markets higher. GM and Google were also in focus

Stocks finished lower Thursday, giving up early gains as high Treasury yields fueled concern about interest-rate hikes. Trading was cautious ahead of Friday's labor report, though the Bank of Japan's move to end its easy monetary policy allayed some uncertainty, says Standard & Poor's MarketScope.

The Dow Jones industrial average fell 33.46 points, or 0.3%, to 10,972.28. The broader Standard & Poor's 500 index dipped 6.24 points, or 0.49%, to 1,272.23. The tech-heavy Nasdaq composite index declined 17.74 points, or 0.78%, to 2,249.72.

Market players were digesting news from Tokyo on Thursday. The Bank of Japan scrapped its five-year experiment with an ultra-loose quantitative easing policy and returned to a conventional interest-rate regime.

On the domestic front, the trade deficit grew 5.3% to a record $68.5 billion in January, up from a revised $65.1 billion in December. Jobless claims for the week ended Mar. 4 rose 8,000 to 303,000, more than expected.

Investors were awaiting Friday's nonfarm payrolls report, expected to show an increase of 220,000, says Action Economics. Also on the economic calendar Friday, January wholesale sales are seen rising 1.5%.

Stocks and bonds showed little reaction to word that Dubai, under political pressure from Congress, agreed to turn U.S. ports it acquired from British company P&O over to a U.S. entity, says S&P MarketScope.

In corporate news, General Motors (GM) rose in afternoon trading amid conflicting reports on the status of a potential deal with Delphi and the United Auto Workers union.

Internet search giant Google (GOOG) was lower after agreeing to pay as much as $90 million to settle a click-fraud lawsuit. Advertisers claimed they paid for clicks on ads that had no chances of generating sales.

Software behemoth Microsoft (MSFT) dipped slightly as the company unveiled its much-hyped Origami project: a paperback-sized computer running Windows XP with a touchscreen. Also in tech, software maker Intuit (INTU ) was higher after raising guidance on its TurboTax tax-preparation program.

Health-care conglomerate Johnson & Johnson (JNJ ) was lower afer approving a $5 billion stock buyback.

M&A activity continued to percolate. Exxon Mobil (XOM ) slipped after reports the world's largest oil company is considering takeovers. The company's president said on TV that Exxon Mobil is not considering deals.

Electronics retailer Sharper Image (SHRP ) surged 23% in afternoon trading on a report that a group of shareholders seek control of the company.

In broker calls, Deutsche Bank boosted Sirius Satellite Radio (SIRI ) from hold to buy. Lehman Brothers upgraded Sun Microsystems (SUNW ) from underweight to equal weight.

Among other companies in the news, the newly public NYSE Group (NYX) slipped on its second day of trading. The company was formed after the New York Stock Exchange's merged with electronic exchange Archipelago Holdings.

In the energy markets Thursday, April West Texas Intermediate crude oil futures closed up 45 cents at $60.47 a barrel amid geopolitical uncertainty in Nigeria and Iran.

European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 43 points, or 0.74%, to 5,855.9. Germany's DAX index climbed 58.86 points, or 1.04%, to 5,732.22. In Paris, the CAC 40 index added 38.33 points, or 0.77%, to 5,007.84.

Asian markets finished mostly higher. Japan's Nikkei 225 index bounced 409.42 points, or 2.63%, to 16,036.91 on the Bank of Japan's decision. In Hong Kong, the Hang Seng index nudged higher by 17.04 points, or 0.11%, to 15,510.13. Korea's Kospi index slipped 2.84 points, or 0.22%, to 1,311.21.

Treasury Market

Treasury yields remained elevated Thursday after giving investors fits earlier in the week. The benchmark 10-year Treasury note closed unchanged at 98-07/32 with a yield of 4.73%, coming off a midsession high of 4.75%. The 30-year bond was also flat at 96-18/32 for a yield of 4.72%. The yield curve for two-year and 10-year Treasuries was no longer inverted.

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