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Wall St Week Ahead: Stocks to tune in to Fed, consumers
Fri Jun 24, 2005 08:37 PM ET
By Emily Chasan
NEW YORK, June 24 (Reuters) - U.S. stock investors will look closely at the Federal Reserve comments next week for clues on whether the central bank thinks the economy is losing steam or chugging along at a decent clip.
Wall Street expects the Fed to raise the fed funds rate another 25 basis points to 3.25 percent in the week ahead. But investors will be looking for signs of whether this rate hike is the last -- or next to last -- for some time.
Recent gains in the market have been fueled by the expectation that the Fed may put further interest-rate hikes temporarily on the back burner if the economy slows. So any indication from the Fed's rate-setting arm on the pace of future hikes will be intensely scrutinized.
Some consumer data and end-of-the-month portfolio tweaking may help pick up the market.
But nervous investors will mostly be tuning in to a few choice words from the Federal Open Market Committee meeting on Wednesday and Thursday.
Investors will "really be paying attention to see whether or not the Fed is getting nervous about economic growth," said Anthony Chan, managing director and senior economist at JPMorgan Asset Management, on Friday.
In the past week, major stock indexes posted the worst weekly percentage declines since mid-April. The Dow Jones industrial average dropped 3.06 percent, the Standard & Poor's fell 2.09 percent and Nasdaq declined 1.76 percent as the price of crude oil touched a record $60 a barrel, and transport stocks slid.
For the week, the Dow Jones Transportation Average fell 5 percent. It includes stocks of companies like FedEx Corp. (FDX.N: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=FDX.N&target=%2fstocks%2fqui ckinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=FDX.N&target=%2fstocks%2 fquickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=FDX.N)) , United Parcel Service Inc. (UPS.N: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=UPS.N&target=%2fstocks%2fqui ckinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=UPS.N&target=%2fstocks%2 fquickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=UPS.N)) and Delta Air Lines (DAL.N: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=DAL.N&target=%2fstocks%2fqui ckinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=DAL.N&target=%2fstocks%2 fquickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=DAL.N)) .
WAITING ON THE F-O-M-C
The FOMC is expected to announce a rate increase, as well as issue its statement on monetary policy and the U.S. economy, on Thursday as the meeting ends at about 2:15 p.m. EDT (1815 GMT).
This would be the ninth consecutive rate increase over the past year. Each time, the Fed has raised borrowing costs by a quarter percentage point, or 25 basis points.
In May, the Fed raised its target for the federal funds rate to 3 percent from 2.75 percent.
From Wall Street to Main Street, investors will note the Fed's views on inflation and economic growth -- and whether it keeps the word "measured" -- Fed code for raising rates a quarter-point at a time -- in its credit-tightening arsenal.
"They're not trying to fight inflation. They're trying to get the housing market to cool down," said Elliot Spar, a market strategist with Ryan Beck & Co.
On Friday, the Commerce Department said new home sales rose 2.1 percent in May, above expectations, but sales for the three previous months were revised lower.
Yet U.S. durable goods orders, excluding civilian aircraft and defense, showed unexpected weakness last month. That raised some questions about the economy's health, in spite of strong new home sales.
Spar expects the Fed to continue raising the federal funds rate past 3.5 percent. If he's right, that would extend the Fed's current cycle of raising rates to at least this fall.
U.S. interest-rate futures, though, showed the market expects the Fed to raise rates this week and again in August -- but beyond that, it's open to debate. The FOMC calendar calls for meetings on Aug. 9, Sept. 20, Nov. 1 and Dec. 13.
CONSUMER WATCH
The Conference Board's consumer confidence index, due on Tuesday, may give investors a hint about whether consumers are inclined toward spending more -- or less. It also could provide a sense of how monthly retail sales will fare.
May personal income and spending data as well as the Chicago Purchasing Managers' Index, set for release on Thursday, may shed some more light on the pace of economic growth.
Just a handful of companies will be reporting earnings, but monthly sales reports from major automakers, and results from non-cyclical companies like Walgreen Co. (WAG.N: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=WAG.N&target=%2fstocks%2fqui ckinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=WAG.N&target=%2fstocks%2 fquickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=WAG.N)) and General Mills Inc. (GIS.N: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=GIS.N&target=%2fstocks%2fqui ckinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=GIS.N&target=%2fstocks%2 fquickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=GIS.N)) may help give the market a more positive tone. Quarterly earnings from Nike Inc. (NKE.N: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=NKE.N&target=%2fstocks%2fqui ckinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=NKE.N&target=%2fstocks%2 fquickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=NKE.N)) and Oracle Corp. (ORCL.O: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=ORCL.O&target=%2fstocks%2fqu ickinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=ORCL.O&target=%2fstocks% 2fquickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=ORCL.O)) are also on deck for next week.
June auto sales may lift the market next Friday, as General Motors Corp.'s (GM.N: Quote (http://www.investor.reuters.com/FullQuote.aspx?ticker=GM.N&target=%2fstocks%2fquic kinfo%2ffullquote), Profile (http://www.investor.reuters.com/StockOverview.aspx?ticker=GM.N&target=%2fstocks%2f quickinfo%2fstockoverview), Research (http://www.investor.reuters.com/StockReports.aspx?ticker=GM.N)) "employee discounts for everyone" marketing scheme is expected to boost sales figures.
"Incentives got a lot more attractive and auto sales have proven in the past that they are incentive-driven," Chan said.
PLAYING 'DRESS UP'
As the quarter comes to a close, some institutional investors may start to gussy up their portfolios by buying more shares of companies they already own or selling off underperforming stocks. Analysts say portfolio tweaking could either help or hurt the stock market next week.
"Will it be window dressing on the upside or an undressing on the down side?" asked Jeffrey Saut, chief investment strategist with Raymond James & Associates.
"It's kind of a coin toss because you're coming to the end of the quarter," he added. "If somebody put a gun to my head, I would say that you've seen the highs for this move." (Additional reporting by Ros Krasny)
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Nasdaq slips on Apple, Dow dips as US oil over $60
Mon Jun 27, 2005 05:31 PM ET
By Anupama Chandrasekaran
NEW YORK, June 27 (Reuters) - U.S. technology stocks slipped on Monday, with the Nasdaq hitting its lowest level in more than a month, as Apple Computer Inc. fell after a rival cut its sales outlook.
The blue-chip Dow average and the broad S&P 500 also ended at their lowest points in more than a month, as oil prices closed above $60 a barrel after hitting another record earlier in the day. The jump in oil prices weighed on stocks of industrial companies like United Technologies Corp. , but boosted shares of Dow component Exxon Mobil Corp.
U.S. crude oil futures ended higher for the third consecutive session on Monday, after soaring to a record just a nickel shy of $61 a barrel as speculative funds stepped up buying amid prospects of stronger U.S. and global demand in the fourth quarter, traders said.
"There is concern about the price of oil and the impact it will have on the economy and earnings," said Hugh Johnson, chief investment officer at Johnson Illington Advisors.
The Dow Jones industrial average fell 7.06 points, or 0.07 percent, to end at 10,290.78, marking its sixth straight day of declines. The broader Standard & Poor's 500 Index closed down just 0.88 point, or 0.07 percent, at 1,190.69. The tech-laced Nasdaq Composite Index dropped 8.07 points, or 0.39 percent, to close at 2,045.20.
After the closing bell, shares of International Business Machines Corp. fell 1 percent to $73 on the Inet electronic brokerage system after the world's largest computer company said it is the subject of an informal probe by U.S. securities regulators, tied to a controversy over its plan to expense employee stock options. IBM, a Dow component, dipped 0.2 percent, or 13 cents, to $73.88 in regular NYSE trading.
Crude for August delivery climbed 70 cents, or 1.2 percent, to settle at $60.54 a barrel, after earlier touching a fresh record high at $60.95 on the New York Mercantile Exchange.
"We are seeing a big transition right here with growth rate expectations dwindling in the light of crude rising so rapidly," said Marc Pado, U.S. market strategist for Cantor Fitzgerald & Co.
"Still, it is a pretty good day, all things considered." Pado added, saying that crude's move to above $60 a barrel didn't come as a shock to the market.
While high oil prices increase corporate expenses and eat into consumers' discretionary spending on products such as cars and consumer electronics, they boost shares of oil companies.
Industrial and aerospace conglomerate United Technologies fell 1.2 percent, or 60 cents, to $51.52, and rival Honeywell International Inc. slipped 1.1 percent, or 40 cents, to $36.30. Both are Dow components.
In contrast, the stock of Exxon Mobil, the world's largest publicly traded oil company, rose 2 percent, or $1.15, to $59.30, while shares of rival oil producer and refiner ConocoPhillips ( gained 2.3 percent, or $1.31, to $59.52.
On Nasdaq, shares of Apple and key suppliers for its iPod music player fell after a rival cut its sales outlook and a report forecast competition from mobile phones with built-in music players.
Apple dropped 1.75 percent, or 66 cents, to $37.10, while shares in SigmaTel Inc. , a supplier for iPod Shuffles, plummeted nearly 17 percent, or $3.69, to $18.15.
"Apple's success has been based on the iPod and that is definitely discretionary spending," Pado said. "So here's something you expected to be whacked."
Cisco Systems Inc. 1.4 percent, or 27 cents, to $19.03 after the biggest maker of Internet equipment, said it has agreed to acquire privately held NetSift Inc. for about $30 million in cash and options.
Earnings news was disappointing, with International Paper Co., the world's largest forest products company, warning that second-quarter earnings could be more than 30 percent below Wall Street forecasts because of high energy costs, among other reasons. International Paper shares fell 3.1 percent, or $1.02, to $31.43.
Drug distributor Cardinal Health Inc. warned that 2006 earnings would fail to meet analysts' estimates due to stepped-up investments and lower margins from vendors. Cardinal's shares dropped 6.7 percent, or $4.08, to $56.43 and dragged on shares of rivals such as McKesson Corp. , which fell 2.1 percent, or 90 cents, to $42.39. [ID:nN27267110]
But Dow component Boeing Co. rose nearly 2 percent, or $1.17, to $61.76 after the aircraft maker said its board had cleared the repurchase of up to 40 million shares, or about 5 percent of its outstanding common stock.
Volume was moderate, with 1.37 billion shares changing hands on the New York Stock Exchange, below last year's daily average of 1.46 billion. On Nasdaq, about 1.51 billion shares traded, below last year's daily average of 1.81 billion.
Decliners were almost evenly matched with advancing shares on the NYSE, with 1,703 issues falling and 1,655 rising. On Nasdaq, about three stocks fell for every two that rose.
Fed seen raising rates,offering few clues on future
Mon Jun 27, 2005 04:44 PM ET
By Alister Bull
WASHINGTON, June 27 (Reuters) - The Federal Reserve is almost certain to raise U.S. interest rates to 3.25 percent and renew its "measured pace" pledge at its policy meeting this week, despite some bets a year-long tightening campaign is near an end.
Economists said policy-makers were also likely to use their two-day meeting to ponder the puzzle of ultra-low long-term interest rates, which have helped stoke U.S. housing, and to consider what happens if and when the property market cools.
"We'll get 25 basis points. That is a 95 percent probability. The next question is will there be any big surprises in the release and I would doubt it," said Lyle Gramley, a former Fed board governor.
In fact, all 21 primary dealers surveyed in a Reuters poll see the Federal Open Market Committee raising the fed funds rate by a quarter percentage point to 3.25 percent when they wrap up their meeting on Thursday.
So when the FOMC announces its decision, expected shortly after 2:15 p.m. EDT (1815 GMT), the real news will be in the careful wording of the brief statement.
The fed funds rate -- the overnight rate at which banks lend deposits held at the Fed to other banks -- is supposed to influence borrowing costs throughout the economy.
But this relationship has weakened in the current hiking cycle with long-term bond yields, which move in the opposite direction from the price, now lower than when the Fed began raising the benchmark rate from one percent 12 months ago. This poses a conundrum, as Fed Chairman Alan Greenspan has put it, that carries substantial risks to economic growth.
One theory offered for why bond yields are so low is that growth is softening and the Fed is ready to halt its tightening. If the Fed thinks this assessment is wrong -- and it cares because the low rates are extremely stimulative for growth, as seen from the house market -- now would be a good time to make this plain.
Any change to the Fed's characterization of its policy as accommodative or to predictions that it can continue to move at a measured pace will be seen as signaling a shift in policy.
NO CHANGE
"I don't expect any signal from the Fed next week that it is considering a pause in the near future," said Dean Maki, chief U.S. economist at Barclays Capital and a former Fed economist, dismissing bond market speculation.
Fixed income investors have staked a lot of money on their conviction the Fed may not have to raise interest rates much further, given evidence of a soft patch in the manufacturing sector and benign inflation. Maki doesn't buy it.
"Although real growth has slowed, nominal growth has sped up, which means inflation has gone up. I think it would be quite strange for the Fed to respond to higher inflation by tightening less than it would have otherwise," he said.
Bond investors have given a lot of weight to comments from Dallas Fed President Richard Fisher that the committee was in the eighth inning of rate hikes -- a reference to the usual nine innings in a game of baseball. Fisher wields one of the rotating FOMC votes this year.
But other policy-makers have pointedly declined to back this view. Richmond Fed President Jeffrey Lacker stated bluntly last week that it was premature to declare the Fed's work done, while Board Governor Donald Kohn deftly distanced himself from Fisher, joking that he didn't do sports analogies.
Bond markets will be disappointed if there are no clues backing up bets of a pause.
"There has to be some indication in the statement for the market to sustain these levels," said Josh Stiles, senior bond strategist at IDEAglobal in New York.
"I don't think they're done at 3.25 percent and it will be data-dependent if they stop at 3.50 percent. There are signs of the economy slowing but what about inflation risks and the risk of a housing bubble? They've got to balance them," he said.
Surging home prices in parts of the United States prompted Greenspan to call some property markets frothy, recalling his famed comment about "irrational exuberance" during the high-tech stock bubble and leaving some investors wondering if something similar lay in store.
Prices are up 12.5 percent nationwide on a year ago with white-hot Las Vegas rising more than 30 percent. There has also been a noticeable escalation in the Fed's warnings that the market cannot keep rising indefinitely, clearly implying this is a factor that could have an impact on Fed policy.
"I think the fact house prices are going up would push them in the direction of raising rates rather than sitting still. Because it is certainly desirable to take steps now which reduce the possibility of a crash later on," said Gramley.
TSP SHARE PRICES 6/28/05 TUESDAY
G=10.91
F=10.67down 3 cents
C=12.92up 12 cents
S=15.05 up 20 cents
I=15.30up 3 cents
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U.S. stocks rally on oil's drop, confidence data
Tue Jun 28, 2005 04:55 PM ET
By Anupama Chandrasekaran
NEW YORK, June 28 (Reuters) - U.S. stocks rallied on Tuesday as crude oil futures ended down more than $2 a barrel a day after hitting a record high and a gauge of consumer confidence jumped to a three-year high, easing market concerns about profit growth and consumer spending.
The Dow posted its first positive day in seven sessions, helped by gains in shares of industrial companies that are benchmarks of the U.S. economy. Industrial and aerospace conglomerate United Technologies Corp. rose nearly 3 percent to $53.02 and diversified manufacturer 3M Co. climbed about 2 percent to $77.10.
The Dow Jones industrial average jumped 114.85 points, or 1.12 percent, to end at 10,405.63. The Standard & Poor's 500 Index gained 10.88 points, or 0.91 percent, to close at 1,201.57. The technology-laced Nasdaq Composite Index advanced 24.69 points, or 1.21 percent, to finish at 2,069.89.
"The fact that oil prices fell today as energy traders took profits helped," said Peter Cardillo, chief market strategist at SW Bach & Co. "No question that consumer confidence that surged in spite of higher energy prices is encouraging."
Advancers outnumbered decliners on both the New York Stock Exchange and the Nasdaq by about 3 to 1.
Volume was moderate, with 1.37 billion shares changing hands on the NYSE, below the 1.46 billion daily average for last year, while on Nasdaq, about 1.62 billion shares traded -- below the 1.81 billion daily average last year.
U.S. crude oil futures ended down more than $2 on Tuesday as traders took profits from a record high of $60.95, set the previous day in New York trading.
Crude for August delivery fell $2.34 to settle at $58.20 a barrel.
The U.S. consumer confidence index, which improved in May, climbed in June to a three-year high of 105.8 as consumers felt more optimistic about the labor market, according to a report from the Conference Board, a private research company.
The number is closely watched since consumer spending represents a large chunk of the U.S. economy and the recent surge in oil prices has raised worries about a likely drop in consumer spending.
LOWER OIL HELPS DISCOUNTERS, AIRLINES
Shares of Dow component Wal-Mart Stores Inc. , the world's biggest retailer, rose 1.9 percent, or 91 cents, to $48.43, after Tuesday's steep drop in crude futures prices.
Lower oil prices are a relief to discount chains because the stores cater to lower-income shoppers who have to spend a larger portion of their budgets on gasoline when energy costs jump.
Tuesday's sharply lower oil futures prices also helped airline stocks, such as Delta Air Lines Inc. , up nearly 13 percent, or 45 cents, at $3.97, and AMR Corp. , the parent company of American Airlines, up 9.3 percent, or $1.04, at $12.25.
The Dow Jones Transportation Average , which includes Delta, AMR, and other airline and shipping company stocks, rose 2.5 percent.
"Another factor that helped the market rebound is that we did not get too many negative earnings announcements," Cardillo said.
Earnings reports were favorable, with Paychex Inc. surging nearly 10 percent, or $2.99, to $33.01 a day after the payroll processor reported higher quarterly profit Rival Automatic Data Processing Inc. gained 3 percent, or $1.25, to $42.38.
Shares of drug maker Wyeth rose 4.4 percent, or $1.89, to $44.89 after the company raised its 2005 profit forecast.
And shares of Dow component International Business Machines Corp. rose nearly 2 percent, or $1.42, to $75.30 after Wall Street analysts made encouraging comments following IBM's disclosure on Monday of a regulatory probe.
After Monday's closing bell, IBM said the U.S. Securities and Exchange Commission has begun an investigation into how the world's largest computer maker disclosed poor results in April/
Analysts said that even though the news had hurt IBM's reputation, the stock's low valuation and promising growth trends could help its price recover from levels near 2-1/2-year lows.
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FACTBOX-One year of Fed rate rises
Tue Jun 28, 2005 05:34 PM ET
WASHINGTON, June 28 (Reuters) - The Federal Reserve is expected to raise interest rates for the ninth straight time on Thursday, one year to the day after it started its latest series of interest rate rises.
The intervening 12 months has been characterized by continued robust growth in the U.S. economy as the Fed's short-term rate rises have been offset by falling long-term borrowing costs -- a phenomenon now known as the "conundrum."
Following is a selection of key price indicators during the past year of Fed tightening:
DATEFED RATES10-YR YLD HOUSE PRICES CORE OIL YR-ON-YR CPI $pb
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*June 30 Up to 1.25 pct 4.60 pct +9.6 pct 1.9 pct $37
*Aug 10 Up to 1.5pct 4.28 pct +7.3 pct 1.7 pct $44
*Sept 21 Up to 1.75 pct 4.11 pct +8.6 pct 2.0 pct $47
*Nov 10 Up to 2 pct 4.25 pct +10.4 pct 2.2 pct $47
*Dec 14 Up to 2.25 pct 4.13 pct +8.1 pct 2.2 pct $42
*Feb 2 Up to 2.5 pct 4.14 pct +11.1 pct 2.4 pct $47
*March 22 Up to 2.75 pct 4.63 pct +11.4 pct 2.3 pct $56
*May 3 Up to 3 pct 4.19 pct +12.5 pct 2.2 pct $50
*June 30 Fed to announce latest rate decision
TSP SHARE PRICES 6/29/05 WEDNESDAY
G=10.91
F=10.66down1 cents
C=12.90down 2 cents
S=15.07 up 2 cents
I=15.33 up 3 cents
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Blue chips slip before Fed rate decision
Wed Jun 29 2005
U.S. blue chip stocks slipped on Wednesday with shares of industrial companies such as Caterpillar Inc. and 3M Co. falling on concern that the Federal Reserve may signal its intention to keep raising interest rates, dampening prospects for economic growth.
The U.S. Federal Reserve's interest-rate panel began a two-day meeting on Wednesday, which economists expect will culminate on Thursday with a ninth straight quarter-point increase in short-term rates as the Fed seeks to keep inflation in check.
With another rate increase a near certainty, analysts will watch for the Fed's post-meeting statement to see if the central bank will offer hints about when it will reconsider its policy of steady interest rate increases.
The Dow Jones industrial average ended down 31.15 points, or 0.30 percent, at 10,374.48. The Standard & Poor's 500 Index was down 1.72 points, or 0.14 percent, at 1,199.85. The technology-laced Nasdaq Composite Index dropped 1 point, or 0.05 percent, to 2,068.89.
Higher interest rates are typically bad for stocks since they increase the cost of borrowing money for consumers and corporations. The fear is that the higher cost could be tough on corporations in a year that profit growth is expected to slow down.
"It is Fed watch time. We don't think it is going to surprise anyone," said Tim Ghriskey, chief investment officer of Solaris Asset Management. "The hope is that the Fed may say that they are almost done with the tightening."
Stocks in interest rate-sensitive sectors such as homebuilding fell with Pulte Homes Inc. down 1.5 percent to $83.24 and KB Home (NYSE:KBH - news) slipping 1.3 percent to $75.09.
GROWTH JITTERS
Earlier, the U.S. Commerce Department said gross domestic product grew at a 3.8 percent annual rate in the first quarter, up from its previous estimate of a 3.5 percent rise for the period.
"Regardless of the GDP numbers there is a real concern that the economy is going to slow in the second half of the year. If that is to be believed then cyclicals will not lead the market. Also, the Fed's move to increasing interest rates could drive the slow growth scenario," said Barry Hyman, equity market strategist at Ehrenkrantz, King, Nussbaum.
Industrial companies, which are benchmarks of the U.S. economy, fell with heavy-equipment maker Caterpillar slipping 1.2 percent to $96.64 and diversified manufacturer 3M dropping 1.4 percent to $76.04.
Crude for August delivery settled down 94 cents at $57.26 a barrel on the New York Mercantile Exchange.
Exxon Mobil Corp. dipped 1.1 percent to $58.44 as U.S. crude oil futures ended sharply lower for the second straight session after a surprise rise in domestic inventories.
Lower energy prices usually help stocks as they lift the pressure on profits and consumer spending but they drag down oil company shares.
"The market today is ignoring another decline in the price of crude oil. We know how volatile these crude prices are so there is always distrust in the short term moves of crude," Ghriskey of Solaris Asset Management said.
EARNINGS MIXED
The earnings picture was mixed. Dow component American International Group Inc. rose 6 percent to $58.48, a day after the insurer posted a 44 percent jump in first-quarter profits.
Oracle Corp. rose 5.8 percent to $13.57 after the software maker posted a stronger-than-expected quarterly profit and gave a bullish outlook.
But Monsanto Co. shares fell 7.1 percent to $63 after the maker of herbicides and specialty seeds said quarterly net income dropped 81 percent due to write-offs for two large acquisitions. It also forecast current-quarter results below Wall Street estimates.
And General Mills Inc.'s shares dropped nearly 7 percent to $47.21. The company reported disappointing quarterly earnings as a rise in cereal prices reduced its market share.
Shares of Apple Computer Inc. fell 2.5 percent to $36.37 after SigmaTel Inc. a top maker of memory chips used in digital music players, cut its outlook, citing lower-than-expected sales and price cuts.
Advancers outnumbered decliners on both the New York Stock Exchange and the Nasdaq.
About 1.35 billion shares changed hands on the NYSE, below the 1.46 billion daily average for last year, while on Nasdaq, about 1.67 billion shares were traded -- below the 1.81 billion daily average last year
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U.S. stocks fall as Fed hints at more rate hikes
Thu Jun 30, 2005 06:03 PM ET
By Anupama Chandrasekaran
NEW YORK, June 30 (Reuters) - U.S. stocks fell on Thursday after the Federal Reserve raised key interest rates a quarter point for a ninth straight time and signaled that more rate increases are in store.
The U.S. central bank's policy-setting Federal Open Market Committee voted unanimously to raise the federal funds rate, charged on overnight loans between banks, to 3.25 percent -- its highest level since mid-September 2001 -- from 3 percent.
While a ninth rate increase was expected, financial markets were hoping the Fed would indicate that the campaign of rate increases was coming to an end in a year when companies are expecting a slowdown in profit growth. Instead, the FOMC said it believed it could continue to raise rates at a "measured" pace, a sign that more quarter-percentage-point rate increases are ahead.
The blue-chip Dow Jones industrial average dropped 99.51 points, or 0.96 percent, to end at 10,274.97. The broad Standard & Poor's 500 Index slipped 8.52 points, or 0.71 percent, to finish at 1,191.33. The technology-laced Nasdaq Composite Index lost 11.93 points, or 0.58 percent, to close at 2,056.96.
"The market was looking for any sign that this process is winding down and this statement doesn't give any sense the Fed is done," said Bill Strazzullo, chief market strategist of State Street Global Markets.
"It's a slight negative for equity markets because there's nothing that gives a clue we're close to the end," Strazzullo added.
Higher interest rates are typically bad for stocks since they raise the cost of borrowing money for consumers and corporations.
Despite some recent signs of economic softness resulting in part from oil prices near record highs, the Fed's desire to curb inflation looked like it would keep official U.S. interest rates on an upward path for now. The FOMC's next meeting is on Aug. 9.
Shares of industrial companies, which are the benchmarks of the U.S. economy, slid after the Fed's rate increase. Heavy-equipment maker Caterpillar Inc. fell 1.4 percent, or $1.33, to $95.31 and chemical maker DuPont dropped 3.6 percent, or $1.62, to $43.01.
U.S. Treasury bond prices climbed on Thursday as investors shrugged off the Fed's latest interest-rate increase and appeared to bet the economy's future was less rosy than policy-makers suggested. The price of the benchmark 10-year U.S. Treasury note rose 18/32 to 101-22/32, while its yield fell to 3.92 percent from 3.99 percent on Wednesday.
For the second quarter, the Dow ended down 2.2 percent, the S&P 500 rose 0.9 percent and Nasdaq climbed 2.9 percent.
In the month of June alone, the Dow slipped 1.8 percent, the S&P 500 inched down 0.01 percent and the Nasdaq fell 0.5 percent.
For the year so far, the Dow is down 4.7 percent, the S&P 500 is off 1.7 percent and the Nasdaq is down 5.5 percent.
BANK OF AMERICA, 3M WEIGH
On the corporate front, Bank of America Corp. said it agreed to buy MBNA Corp. (, the biggest independent credit card lender, for $35 billion, making the No. 2 U.S. banking company one of the world's biggest card issuers. [ID]
Bank of America lost 2.8 percent, or $1.30, to $45.61, while MBNA jumped 24.3 percent, or $5.11, to $26.16.
Shares of Dow component Boeing Co. shot up 7 percent, or $4.33, to $66 after the aircraft maker named 3M Co. ( Chief Executive James McNerney as chairman and CEO, favoring him over candidates inside Boeing's ranks.
In other acquisition news, Countrywide Financial Corp. , the largest U.S. mortgage lender, said it will acquire almost all the assets of KB Home's mortgage business. Countrywide's stock rose 0.5 percent, or 20 cents, to $38.61, while KB Home's shares gained 1.5 percent, or $1.14, to $76.23.
Shares of Dow component 3M, where McNerney is widely credited with overseeing a turnaround after he joined the diversified manufacturer in 2001, declined nearly 5 percent, or $3.74, to $72.30.
After the closing bell, shares of Pixar Animation Studios sank almost 10 percent to $45.14 on the Inet electronic brokerage network from a Nasdaq close at $50.05. The stock slid after the company said it was cutting its fiscal second-quarter earnings target to account for the possibility of higher-than-expected returns of "The Incredibles" DVDs.
LOWER OIL OF LITTLE HELP
Meanwhile, U.S. crude futures fell more than $1 to below $56 a barrel as funds sold when heating oil futures pared gains. NYMEX August crude futures settled at $56.50, down 76 cents, after dropping as low as $55.90.
While lower oil prices are usually good for stock markets, they weigh on shares of oil companies whose profits depend on the price of oil. Dow component Exxon Mobil Corp. ( , the world's largest publicly traded oil company, skidded 1.7 percent, or 97 cents, to $57.47, while rival oil producer and refiner ConocoPhillips slipped 0.5 percent, or 28 cents, to $57.49.
Thursday is the last day of the second quarter, a time when trading can be volatile as fund managers square up their positions.
Decliners outpaced advancers by a ratio of about 9 to 8 on the New York Stock Exchange, and on Nasdaq, by about 8 to 7.
About 1.63 billion shares changed hands on the NYSE, above the 1.46 billion daily average for last year, while on Nasdaq, about 1.77 billion shares were traded -- below the 1.81 billion daily average last year.
TSP Share Prices Jun 30, 2005 Thursday
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Wall St seen rising at start; Conoco, Pfizer eyed
Fri Jul 1, 2005 06:23 AM ET
By Anshuman Daga
LONDON, July 1 (Reuters) - U.S. stocks are set for a stronger start on Friday, cutting losses made in the previous session as markets take the latest interest rate hike by the Federal Reserve in their stride.
Stocks to watch include energy company ConocoPhillips ahead of an interim trading update, and car makers Ford and General Motors as auto sales for June are released.
Pfizer will be under the spotlight after saying it had abandoned efforts to jointly develop Altana's smoker's lung drug Daxas after a study showed the treatment failed to reach a key target, sending shares in the German firm 12 percent lower.
Pfizer will return all rights to the drug to Altana.
By 0945 GMT, U.S. stock futures were pointing to opening gains of between 0.3 and 0.4 percent for the three main indexes (SPc1) (DJc1) (NDc1) .
European markets were higher in late morning as shares in oil majors tracked stronger crude prices.
U.S. stocks fell on Thursday after the Federal Reserve raised key interest rates by 25 basis points, the ninth straight increase, and signalled that more rate increases were in store.
"I think that was a knee-jerk reaction, and people needed to square their positions ahead of the quarter-end," said Tom Hougaard, chief market strategist at spread betters City Index.
"Now we are into a new quarter, and prices are simply being marked up again." For the second quarter, the Dow ended down 2.2 percent and is still nearly 5 percent lower in 2005.
Trading in the U.S. was likely to be thin ahead of the Independence Day market holiday on Monday.
Also in focus on Friday is the University of Michigan's final consumer sentiment index for June due at 1345 GMT and manufacturing data due at 1400 GMT.
While an interest rate rise was expected on Thursday, financial markets were hoping the Fed would indicate a year-long tightening of borrowing costs was coming to an end in a year when firms are expecting a slowdown in profit growth.
"The positive comments that came from the Fed were that the labour market has continued to improve in spite of higher oil prices," said Angus Campbell, head of sales and trading at spread betters FinSpreads.
TSP Share Prices July 01, 2005 TFriday
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Dow ends higher on GM sales, U.S. economic data
Fri Jul 1, 2005 06:11 PM ET
By Jennifer Coogan
NEW YORK, July 1 (Reuters) - U.S. blue-chip stocks advanced on Friday, helped by evidence of stronger consumer confidence and manufacturing last month, while General Motors Corp. shares climbed after it reported a jump in sales.
Still, the Nasdaq's gains were limited by a drop in Pixar Animation Studios Inc. shares, which fell almost 14 percent after the company cut its earnings forecast.
Wall Street got good news on consumer confidence for the second time this week, when the University of Michigan's consumer sentiment index for June exceeded analysts' forecasts -- after the Conference Board's report earlier this week that its consumer confidence index hit a three-year high. And a monthly report from the Institute for Supply Management showed U.S. manufacturing activity grew quickly in June, easing investors' concerns about an economic slowdown.
The Dow Jones industrial average rose 28.47 points, or 0.28 percent, to end at 10,303.44. The Standard & Poor's 500 Index added 3.11 points, or 0.26 percent, to finish at 1,194.44. The technology-laced Nasdaq Composite Index inched up just 0.41 of a point, or 0.02 percent, to close at 2,057.37.
"We've got good economic numbers, strength in the economy and low inflationary pressures," said Tom Schrader, head of listed equity trading at Legg Mason Wood Walker. "These numbers indicate that the consumer is handling the higher oil prices as best as they can."
For the week, the Dow ended up 0.05 percent, the S&P 500 edged up 0.24 percent and Nasdaq crept up 0.20 percent.
After the closing bell, shares of Boston Scientific Corp. soared 10.6 percent to $29.75 from a Nasdaq close at $26.89, while Johnson & Johnson shares fell 0.6 percent to $64.55 on the Inet electronic brokerage network.
A federal jury in Delaware on Friday found that Johnson & Johnson infringed two of Boston Scientific's patents on drug-coated stents, Boston Scientific said.
CONSUMER, MANUFACTURING DATA HELP
The University of Michigan's June consumer sentiment index jumped to 96, beating the 94.8 forecast of economists in a Reuters poll, according to people who saw the subscription-only Michigan report. The reading for May was 86.9.
Analysts had warned that rising crude prices could dampen consumer spending, as higher gasoline prices eat into discretionary budgets.
The Michigan report offered some positive reinforcement of the Conference Board's report on Tuesday that its June index of consumer confidence rose to 105.8 in June, its highest level in three years, on consumers' optimism about the labor market.
In another economic report on Friday, the Institute for Supply Management, or ISM, said its index of national factory activity climbed to 53.8 in June, well above economists' forecasts of a slight uptick. The ISM said a jump in new orders helped the manufacturing sector, which overcame the hurdle of soaring energy prices.
GM AND EXXON MOBIL LIFT THE DOW
General Motors stock shot up 1.9 percent, or 65 cents, to $34.65 after the world's largest automaker reported that U.S. sales surged 41 percent in June. [ID] General Motors credited an aggressive "Employee Discount for Everyone" incentive program for its skyrocketing sales.
Shares of Ford Motor Co rose 0.7 percent, or just 7 cents, to $10.31 after the company reported a 1 percent increase in unadjusted monthly U.S. auto sales. But on an adjusted basis, Ford's U.S. sales of new cars and trucks fell for the 13th consecutive month in June.
"Autos are doing better as car sales are better," said Larry Peruzzi, senior equity trader at The Boston Co. Asset Management. "Oil prices are bouncing back and helping the energy companies."
On Friday, crude oil for August delivery settled up $2.25 at $58.75 a barrel, lifted by short covering before the long weekend for the U.S. Independence Day holiday on Monday. Still, that settlement price marked a retreat from Monday, when NYMEX August crude hit a record $60.95.
U.S. financial and commodity futures markets will be closed on Monday for the Independence Day holiday.
Shares of Dow component Exxon Mobil Corp. rose 1.5 percent, or 84 cents, to $58.31, boosted by the climb in crude prices.
The American Stock Exchange index of energy companies gained 2.3 percent.
PIXAR PLUNGES, XM SURGES
In Nasdaq trading, Pixar shares plunged 14 percent, or $6.99, to $43.06 a day after the company cut its forecast on weaker-than-expected DVD sales of its hit film "The Incredibles."
But XM Satellite Radio Holdings Inc. advanced 3.5 percent, or $1.16, to $34.82 after it said on Friday that subscribers increased by 640,000 in the second quarter, bringing its listeners to a total of 4.4 million..
Shares of Dow component Coca-Cola Co. rose 1.1 percent, or 46 cents, to $42.21 on the NYSE. The world's largest soft drink maker has spent the past year and a half remodeling to suit consumer tastes.
But blue-chip company Pfizer Inc. fell 1.7 percent, or 48 cents, to $27.10 after the world's largest drug company said it is dropping development of two drugs.
Trading was moderate, with 1.25 billion shares changing hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.24 billion shares traded on Nasdaq, under the 1.81 billion daily average last year.
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GLOBAL MARKETS-Bulls run for U.S. stocks as bears bite oil
Mon Jul 11, 2005 06:01 PM ET
By Andre Grenon NEW YORK, July 11 (Reuters) - The bulls were out in force for stocks and gold on U.S. markets on Monday, but bonds, the dollar and oil all began the week on a bearish note.
U.S. stocks closed up for the third straight session, with the Nasdaq closing at its highest level in six months, as optimism about coming corporate earnings and a solid retreat of crude oil prices let the bulls out.
"I think there's a bit of relief as we've seen oil prices back off to lower levels," said Owen Fitzpatrick of Deutsche Bank Private Wealth Management.
"There's a little looking forward to a decent earnings period. Alcoa on Friday had numbers that I think alleviated some concerns ... and I think, as we get into this earnings season, we'll see more of rally."
The Dow Jones Industrial average was up 70.58 points, or 0.68 percent, to end at 10,519.72. The Standard & Poor's 500 Index was up 7.58 points, or 0.63 percent, to finish at 1,219.44 and the Nasdaq Composite Index closed up 22.55 points, or 1.07 percent, at 2,135.43.
END OF A BOND RALLY?
But U.S. Treasury debt prices eased as the stock gains reinforced fears that a bond rally that has lasted the better part of three months might have run its course, despite a major attack on London's transportation network and a soft U.S. payrolls report last week.
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, reinforced the tone by saying it was too early to ponder a pause in interest- rate increases.
Charles Lieberman at Advisors Capital Management observed that "growth is very solid, enough so that the Fed will remain on a steady course to hike interest rates over the balance of the year."
The benchmark 10-year note was off 1/32 at a price of 100-7/32 for a yield of 4.10 percent, barely changed on the day. The two-year note dipped 1/32 to 99-11/32 and was yielding 3.80 percent, up from 3.77 percent late Friday.
But the 30-year bond was up 1/32 at 115-27/32, while its yield stood at 4.34 percent.
TRADE GAP UNDERMINES DOLLAR
The dollar fell across the board as investors turned their attention to Wednesday's U.S. trade data, which are expected to show the near-record deficit widening again in May to $57 billion.
"The (trade) report is, of course, important because that speaks to the dollar's structural liabilities," said Alex Beuzelin at Ruesch International in Washington, D.C.
The euro's push also may have been given impetus by a report the United Arab Emirates might diversify as much as 5 percent of its reserves out of dollars and into euros.
By late afternoon, the euro was trading at $1.2063, up 0.8 percent from $1.1970 on Friday, after hitting a 14-month low of $1.1866 last week.
Against the Japanese currency, the dollar was down 0.4 percent at 111.79 yen and against the Swiss franc, down 0.8 percent at 1.2876 Swiss francs . Sterling made a comeback as the market saw a limited economic impact from the bombings, with the currency recovering from a 19-month low, to trade up 1.05 percent at $1.7565
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OIL TAKES A BATH
But good news for property owners in the Gulf of Mexico turned out to be bad news for U.S. crude oil futures, which ended sharply lower after Hurricane Dennis made landfall without causing major disruption to production facilities.
"The petroleum complex remains on the defensive after Hurricane Dennis proved benign, at least in terms of its impact on U.S. crude oil and refining capacity are concerned," said Tim Evans at IFR Energy Services.
NYMEX August crude futures settled 71 cents lower, or 1.2 percent, at $58.92 a barrel, after falling as much as $1.61 to the session low of $58.02 on the New York Mercantile Exchange. Technical support was pierced at $58.20.
Prices were down for a third day in a row, below the $62.10 record set on July 7.
In London, August Brent crude settled down 76 cents, or 1.3 percent, at $57.44 a barrel, after falling to $56.62, on the International Petroleum Exchange.
PRECIOUS METALS SPARKLE
Gold futures ended higher on speculative and trade buying, as the dollar's decline made dollar-priced bullion cheaper overseas, dealers said.
Gains in gold and copper helped lift industrial precious metals, too, with silver, platinum and palladium all rising.
COMEX August gold rose $2.50 to close at $426.30 an ounce.
"Demand is pretty strong down here in the $420s," said James Turk of GoldMoney.com. "And considering that the summer months are normally slow, the fact that we're seeing strong physical support here is good, too."
Several European stock markets ended at three-year highs -- crossing levels set before the London bomb attacks -- encouraged by a drop in oil prices and a technology rally.
OVERSEAS, STOCKS RISE
The pan-European FTSEurofirst 300 index rose 0.54 percent, or 6.16 points, to end at 1,157.50, just below a three-year high of 1,159.07 set last week.
Japan's Nikkei average rose 0.94 percent to a 13-week closing high as blue chips advanced on hopes for strong earnings and on gains by their U.S. counterparts.
The Nikkei rallied 108.80 points to close at 11,674.79, its highest finish since April 11.
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