BusinessWeek.com
November 30, 2006
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Stocks End Mixed After Lackluster Data
Weekly jobless claims and October personal spending rose, while Chicago PMI sank. Retailers posted tepid November same-store sales
Major stock indexes finished narrowly mixed Thursday, recovering from early lows as climbing oil prices helped boost energy shares. Bargain-hunting, a buy program, and end-of-month portfolio adjustments helped traders look past lackluster retail sales and economic reports suggesting slower economic growth, says Standard & Poor's Equity Research.On Thursday, the Dow Jones industrial average edged down 4.8 points, or 0.04%, to 12,221.93, rising 1.2% for the month. The broader Standard & Poor's 500 index rose 1.17 points, or 0.08%, to 1,400.65, ending the month up 2.7%. The tech-heavy Nasdaq composite crept lower 0.46 points, or 0.02%, to 2,431.77, a 1.6% monthly gain.
NYSE breadth was slightly positive, with 22 issues advancing for every 19 declining. Nasdaq breadth was 16-13 positive.
Investors faced another busy slate of economic data Thursday, following Wednesday's stronger-than-expected revision to third-quarter gross domestic product. Jobless claims rose 34,000 to 357,000 in the week ended Nov. 25, from an upwardly revised 323,000. Though the numbers are higher than expected, it's probably a seasonal problem related to the Thanksgiving holiday, says Action Economics.
Personal income rose 0.4% in October, and spending edged up 0.2%. The personal consumption expenditures (PCE) deflator dipped 0.2%, while the core PCE index, which excludes food and energy, gained 0.2%. The report was in line with expectations.
The Chicago purchasing manager's index unexpectedly sank to 49.9 for November, from 53.5 in October.
Some analysts continue to expect modest gains from Friday's Institute for Supply Management index of manufacturing activity. "Although the weakness in the Chicago index raises downside risk to tomorrow's ISM manufacturing survey, we note the Philadelphia Fed index, New York Fed Empire State index, and Richmond Fed index all improved in November," says Bear Stearns senior economist Conrad DeQuadros.
The economic docket Friday holds the release of October construction spending, November ISM, and November domestic auto sales. Several Federal Reserve officials, including Fed Chairman Ben Bernanke, are set to speak.
Oil prices built on their recent rebound Thursday, supporting corresponding stocks. In the energy markets, January West Texas Intermediate crude futures rose 67 cents to $63.13 a barrel, a two-month high, extending Wednesday's rally on a bullish inventory report and colder weather forecasts.
Meanwhile, retail were reporting mostly disappointing November same-store sales Thursday. Federated (FD) and Target (TGT) were among retailers beating Wall Street forecasts.
Store operators missing analyst estimates included Abercrombie & Fitch (ANF), AnnTaylor (ANN), Bebe (BEBE), Costco (COST), Gap (GPS), J.C. Penney (JCP), and Pier 1 Imports (PIR).
Retail giant Wal-Mart (WMT), which previously reported an unexpected 0.1% drop in November same-store sales, said it projects same-store sales to be flat to up 1% in December.
Elsewhere, General Motors (GM) was modestly lower amid news dissident investor Kirk Kerkorian was selling 14 million shares in the automaker, cutting his stake more than expected to 4.95%.
Delta Air Lines (DALRQ.PK) posted a narrower loss of $88 million in October. The company, which is operating under bankruptcy protection, faces a hostile bid from U.S. Airways (LCC) reportedly worth $8.5 billion.
Heinz (HNZ) was higher after the ketchup maker reported a 6% drop in second-quarter earnings but raised its outlook for the full fiscal year.
In analyst calls, HSBC cut its recommendation on Merck (MRK) from neutral to underweight. Separately, Bank of America upgraded KB Home (KBH) from cautious to neutral.
European markets finished lower. In London, the FTSE-100 index fell 35.6 points, or 0.59%, to 6,048.8. Germany's DAX index dropped 54.61 points, or 0.86%, to 6,309.19. In Paris, the CAC 40 index slid 53.61 points, or 1%, to 5,327.64.
Asian markets ended higher. In Japan, the Nikkei 225 index gained 198.13 points, or 1.23%, to 16,274.33. In Hong Kong, the Hang Seng index advanced 179.55 points, or 0.96%, to 18,960.48. Korea's Kospi index added 9.66 points, or 0.68%, to 1,432.21.
Treasury Market
Treasury yields dipped after the surge in jobless claims and the weak Chicago PMI report. The 10-year note rose in price to 101-09/32 for a yield of 4.46%, while the 30-year bond climbed to 99-00/32 for a yield of 4.56%.
