November 9, 2006
Stocks Fall amid Oil Rise, Weak Sentiment
Crude futures pushed above $61, while consumer sentiment missed expectations. Democrats secured control of the Senate in addition to the HouseStocks finished lower Thursday, as the Dow dipped after its 14th all-time closing high in 26 days. Democrats won a tightly contested Senate seat in Virginia, putting the party in charge of both houses of Congress for the first time in 12 years following Tuesday's midterm elections. Tech bellwether Cisco (CSCO) issued a positive outlook, while traders were also considering rising commodity prices and an unexpectedly soft consumer sentiment reading.
On Thursday, the Dow Jones industrial average fell 73.24 points, or 0.6%, to 12,103.3, pulling back from the previous session's record close of 12,176.54. The broader Standard & Poor's 500 index dropped 7.39 points, or 0.53%, to 1,378.33. The tech-heavy Nasdaq composite lost 8.93 points, or 0.37%, to 2,376.01.
Investors were consolidating three straight days of gains, says Standard & Poor's Equity Research. NYSE breadth was negative, with 19 issues declining for every 13 advancing, while Nasdaq breadth was 20-10 negative.
The prospect of a Democratic Senate was in focus Thursday. The Associated Press late Wednesday projected Democratic Senate candidate Jim Webb to win a previously undetermined race in Virginia against Sen. George Allen (R-Va.), who conceded Thursday afternoon. The win gave Democrats control of the Senate after already landing a majority in the House of Representatives.
Oil prices surged. In the energy markets, December West Texas Intermediate crude futures rose $1.33 to $61.16 a barrel after the Kuwaiti oil minister expressed confidence OPEC would meet its goal of cutting output by 1.2 million barrels a day.
On the economic front, consumer sentiment dipped to 92.3 in the University of Michigan's preliminary November survey, from 93.6 in October. Separately, wholesale sales dropped 1.2% in September, following a downwardly revised 0.7% gain in August.
Meanwhile, the trade deficit fell to $64.3 billion in September, from $69 billion in August. Import prices dropped 2% in October, while export prices slipped 0.4%. Initial jobless claims declined 20,000 to 308,000 for the week ended Nov. 4.
On the company side, Cisco was higher after the networking equipment maker reported higher third-quarter earnings and said sales will gain as much as $25% to $8.29 billion in the fourth quarter.
UBS raised its recommendation on Cisco shares from neutral to buy. Merrill Lynch lifted its stock price target.
In other earnings news, retailer J.C. Penney (JCP) posted a nearly 23% rise in third-quarter profit.
Media conglomerate Viacom (VIA), (VIA.B) said Chief Financial Officer Michael Dolan will step down at the end of 2006. The company also posted an almost 16% drop in third-quarter earnings.
Separately, fellow media giant News Corp. (NWS) said it swung to profitability in its fiscal first quarter with net income of $843 million.
Companies set to announce quarterly results after the close include Disney (DIS).
In deal activity, Dow component 3M (MMM) said it is selling its branded drug business in three separate deals valued at almost $2.1 billion.
European markets finished mixed. In London, the FTSE-100 index shed 7.5 points, or 0.12%, to 6,231.5. Germany's DAX index rose 9.42 points, or 0.15%, to 6,358.68. In Paris, the CAC 40 index added 11.44 points, or 0.21%, to 5,448.6.
Asian markets ended mixed. In Japan, the Nikkei 225 index slipped 17.17 points, or 0.11%, to 16,198.57. In Hong Kong, the Hang Seng index gained 141.62 points, or 0.75%, to 18,952.86. Korea's Kospi index advanced 19.37 points, or 1.4%, to 1,399.44.
Treasury prices drifted as investors weighed a raft of economic data. The 10-year note edged up in price to 101-29/32 for a yield of 4.63%, while the 30-year bond slipped to 96-10/32 for a yield of 4.73%.