November 17, 2006
Dow Inches to Record Despite Housing Data
Housing starts plunged in October, countering recent improvements in other indicators for the sector. Also in focus: HP, StarbucksStocks finished mixed Friday, as the Dow reached its fourth straight all-time closing high but a weak housing report hampered the broader market. Trading was active amid options expiration this session, says Standard & Poor's Equity Research.
On Friday, the Dow Jones industrial average rose 36.74 points, or 0.3%, to 12,342.56, a new closing record. Strength in AT&T (T) and Altria (MO) boosted the blue-chip benchmark. The broader Standard & Poor's 500 index added 1.44 points, or 0.1%, to 1,401.2. The tech-heavy Nasdaq composite slipped 3.2 points, or 0.13%, to 2,445.86.
NYSE breadth was negative, with 17 issues declining for every 16 advancing. Nasdaq breadth was 17-13 negative.
Investors were sifting through disappointing housing data Friday. Housing starts sank 14.6% to a 1.486 million pace in October, from a downwardly revised 1.74 million in September. Building permits fell 6.3%, their ninth straight monthly decline. The numbers are much weaker than expected and run counter to improvements in most other housing indicators, says Action Economics.
The housing figures raise downside risks to economic growth projections, some analysts say.
"Although there have been several signs in other reports that the housing sector has begun to stabilize (purchase applications, homebuilder sentiment, etc.), the weakness in housing starts in October suggests that construction may subtract more than we have been anticipating from fourth-quarter GDP growth," says John Ryding, chief U.S. economist at Bear Stearns.
The economic docket Monday holds the release of the October index of leading economic indicators ahead of a short Thanksgiving holiday week.
On the company side, Hewlett-Packard (HPQ) said its fourth-quarter earnings quadrupled on higher sales, topping analyst expectations. But shares of the computer maker dipped on news the SEC has issued notice of a formal investigation into the company's investigation of boardroom leaks.
Starbucks (SBUX) was also lower as the coffee seller reported a 5.2% decline in fourth-quarter profit and analysts expressed worries about labor costs.
Gap (GPS) posted an 11% drop in third-quarter profit and reduced its earnings outlook for 2007, but shares of the retailer rose.
In deal news, Johnson & Johnson (JNJ) agreed to buy stent maker Conor Medsystems (CONR) for $1.4 billion in cash.
Meanwhile, U.S. Steel (X) was sharply higher amid reports of speculation that Russian metals giant OAO Severstal could acquire the steel producer.
Energy exchange NYMEX Holdings (NMX) was also up sharply after its initial public offering raised $383.5 million.
In the energy markets, December West Texas Intermediate crude futures fell 45 cents to $55.81, a 17-month low, amid reduced fuel demand and skepticism over OPEC cuts. January contracts take over on Monday.
European markets finished lower. In London, the FTSE-100 index fell 62.9 points, or 1.01%, to 6,192. Germany's DAX index dropped 26.98 points, or 0.42%, to 6,416.04. In Paris, the CAC 40 index slid 66.01 points, or 1.2%, to 5,439.71.
Asian markets ended mixed. In Japan, the Nikkei 225 index lost 72.14 points, or 0.45%, to 16,091.73. In Hong Kong, the Hang Seng index gained 28.64 points, or 0.14%, to 19,182.71. Korea's Kospi index was up 1.47 points, or 0.1%, to 1,412.22.
Treasury yields fell after the damp housing starts data. The 10-year note rose in price to 100-06/32 for a yield of 4.6%, while the 30-year bond advanced to 97-00/32 for a yield of 4.69%.