Investors' concerns over the economy and potential inflation outweighed a sharp drop in oil prices, sending stocks slightly lower yesterday. All three major indexes were lower...
NEW YORK Investors’ concerns over the economy and potential inflation outweighed a sharp drop in oil prices, sending stocks slightly lower yesterday. All three major indexes were lower for the week as Wall Street’s customary year-end rally stalled.
The Dow Jones industrial average fell 9.60 to 10,543.22 yesterday, ending the week down 0.5 percent.
Microsoft, one of the 30 Dow stocks, slipped 15 cents yesterday to close at $27.08 a share, ending the week down 0.6 percent. Boeing, also a Dow stock, was down 36 cents yesterday to $52.42, off 5.1 percent for the week.
Broader stock indicators were narrowly lower yesterday. The Standard & Poor’s 500 index was down 1.24 at 1,188.00, down 0.3 percent for the week. And the Nasdaq composite index fell 0.94 to 2,128.07, ending the week off 0.9 percent.
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The week’s trading was marked by wide swings in oil prices, a mix of economic data, and a great deal of investor uncertainty that left stocks lower.
Wall Street was rattled somewhat by the Labor Department’s latest Producer Price Index (PPI) report, which measures wholesale prices. The PPI rose 0.5 percent in November, far less than October’s 1.7 percent rise, but still a troublesome indicator of possible inflation.
The sour mood overshadowed a surprising drop in crude-oil futures, which came after OPEC agreed to cut oil production by 1 million barrels per day. The move was designed to keep prices steady, although even with yesterday’s drop, they remain at historically high levels. A barrel of light crude was quoted at $40.71, down $1.82, on the New York Mercantile Exchange.
“A lot of the run-up in oil was speculation, and some of that froth has been taken out,” said Chris Wiles, senior director of large-cap growth and core equity investment for the Armada Funds. “And the reaction to the OPEC moves shows that OPEC is just not the driving force that they used to be. That’s good for our economy.”
The University of Michigan’s latest consumer-sentiment index reading helped keep the market’s losses minimal, as the index rose to 95.7 from 92.8 in November. Economists had expected a reading of 93.2, and the index’s gains bode well for increased holiday spending this month.
“Overall, this headline PPI number came in a lot higher than expected, but then we got better sentiment than expected,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “All told, this news is kind of a wash, but it gives us the chance to move a little higher later on.”
The wholesale report convinced many investors that the Federal Reserve would move the nation’s benchmark interest rate higher by a quarter percentage point at its meeting on Tuesday. Rates currently stand at 2 percent, but with a weak dollar, rising energy costs and climbing wholesale prices, a rate hike and future moves higher are considered very likely.
The rise in wholesale prices has not yet filtered down to consumers to any great degree, which has left many companies with tighter margins and the prospects of reduced growth. Auto parts maker Delphi said it plans to cut 8,500 jobs in 2005, with 5,500 of those cuts coming from overseas jobs. The company also reduced its fourth-quarter earnings forecasts to reflect the cuts and lower sales. Delphi lost 34 cents to $8.30.
General Electric shares closed up 67 cents yesterday at $36.69, after it raised its quarterly dividend by 10 percent and launched a plan to buy back up to $15 billion in shares over three years, as it projected double-digit percentage earnings growth for 2005.
GE said it raised its dividend to 22 cents a share from 20 cents, payable Jan. 25 to shareholders of record on Dec. 27.