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BusinessWeek.com
August 25, 2006
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Stocks Drift after Bernanke Speech

The Fed chief's remarks did not touch on interest rates or the U.S. economy. All three major indexes finished down on the week

Stocks finished narrowly mixed Friday, with major indexes posting weekly losses, after Federal Reserve Chairman Ben Bernanke avoided references to monetary policy or the U.S. econonomy in a highly anticipated speech. Volume was light in an otherwise quiet session for corporate and economic news.

The Dow Jones industrial average fell 20.41 points, or 0.18%, to 11,284.05, a weekly decline of 0.9%. The broader Standard & Poor's 500 inched lower 0.97 points, or 0.07%, to 1,295.09, finishing the week down 0.5%. The tech-heavy Nasdaq composite was up 3.18 points, or 0.15%, to 2,140.29, a loss of 1.1% on the week.

NYSE breadth was slightly positive, with 17 issues advancing for every 16 declining, while Nasdaq breadth was 16-14 positive

Bernanke's speech was in focus Friday. The Fed chief praised globalization and warned policymakers against protectionism in prepared remarks delivered in Jackson Hole (Wyo.). The remarks followed a week when weaker-than-expected data on the housing market fanned concerns the economy may be slowing more than the Fed expected.

The recent numbers rule out an "orderly" slowdown for housing, some analysts say. "The Fed is clearly done, in our view," says David Rosenberg, North American economist at Merrill Lynch, in a report. "The only thing 'orderly' out there right now is the guy carrying the stretcher."

Investors await a raft of economic reports next week. August payrolls tops the calendar, while data releases are also due on consumer spending, consumer confidence, and personal income. In addition, the week holds the release of the minutes to the Fed's Aug. 8 monetary policy meeting.

In corporate news, Home Depot (HD) was modestly higher after the home-improvement retailer authorized an additional $3.5 billion in share repurchases, upping its buyback total to $17.5 billion.

Automaker Ford (F) was higher amid continued deal buzz. The head of a U.K. construction-machinery outfit reportedly said he was interested in buying Ford's beleaguered Jaguar brand. Separately, Robert Rubin, a director at Citigroup (C ), resigned from the automaker's board citing the appearance of a conflict of interest.

Japanese rival Toyota (TM ) was lower following reports the company may delay the introduction of some new models by up to six months.

Clothing retailer J. Crew (JCG ) was lower after the company posted a wider second-quarter loss of $2.76 million.

Shares of KB Home (KBH ) fell slightly as the homebuilder said it was notified the SEC will be conducting an informal investigation into the company's stock-options grants.

In the energy markets, October West Texas Intermediate crude oil futures closed up 15 cents at $72.51 a barrel after surging at the outset on concerns a storm brewing in the Caribbean could threaten drilling operations in the Gulf of Mexico.

European markets finished narrowly mixed. In London, the Financial Times-Stock Exchange 100 index rose 9.5 points, or 0.16%, to 5,878.6. Germany's DAX index shed 2.61 points, or 0.04%, to 5,811.47. In Paris, the CAC 40 index edged down 1.72 points, or 0.03%, to 5,111.13.

Asian markets ended mixed. Japan's Nikkei 225 index eased 21.96 points, or 0.14%, to 15,938.66. In Hong Kong, the Hang Seng index gained 72.41 points, or 0.43%, to 16,955.45. Korea's Kospi index advanced 13.62 points, or 1.04%, to 1,329.35.

Treasury Market

Treasuries drifted higher after Bernanke's speech lacked market-moving comments. The 10-year note edged up in price to 100-22/32 for a yield of 4.79%, while the 30-year bond rose modestly to 93-11/32 for a yield of 4.93%. "Month-end bond index duration extensions may be a bullish factor next week," says Action Economics.