Wall Street began 2005 with a loss yesterday as investors shored up portfolios and abandoned risky positions taken during the postelection rally. The drop came despite falling...
NEW YORK — Wall Street began 2005 with a loss yesterday as investors shored up portfolios and abandoned risky positions taken during the postelection rally. The drop came despite falling oil prices and a better-than-expected sales forecast from Wal-Mart Stores.
The Dow Jones industrial average fell 53.58, or 0.5 percent, to 10,729.43.
Microsoft, one of the 30 Dow stocks, rose 2 cents to close at $26.74 a share. Boeing, also a Dow stock, dropped 80 cents to $50.97.
Broader stock indicators fell sharply. The Standard & Poor’s 500 index was down 9.84, or 0.81 percent, at 1,202.08, and the Nasdaq composite index tumbled 23.29, or 1.07 percent, to 2,152.15.
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Analysts at Goldman Sachs increased earnings targets for Google and Yahoo!, saying advertising revenues would increase through the early part of the year. Yahoo! rose 50 cents to $38.18, while Google surged $9.92 to $202.72, a record-high close.
While Wall Street has usually opened the new year with a buying spree, investors were picky, favoring large-caps with solid balance sheets over small-caps and more speculative bets.
“Usually, you see a lot more speculative trading to start the new year, with all the new money coming in,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “But here, you’re seeing a big move to quality, large-cap stocks. I think there’s been a realization that these stocks are attractively priced.”
As investors sold stocks, they overlooked a sharp drop in crude futures, triggered by mild weather in the Northeast and reports of increased crude production. The drop could be good news for consumer spending, which accounts for two-thirds of the nation’s economy. A barrel of light crude was quoted at $42.13, down $1.32, on the New York Mercantile Exchange.
A mix of economic news further sapped any momentum stocks may have enjoyed. Construction spending took an unexpected hit in November, falling 0.4 percent for the month, the Commerce Department said. Investors had been expecting a rise of 0.4 percent after October’s 0.3 percent gain.
The Institute for Supply Management’s (ISM) manufacturing index rose to 58.6 in December, from 57.8 in the previous month and edging past Wall Street’s prediction of 58.5.
The index measures the strength of manufacturing in the United States. However, Hugh Johnson, chief investment officer at First Albany, noted that a breakdown of the ISM report showed problems, most notably in a lack of employment and production volume.
“There were certainly aspects of the ISM report that were not comforting,” Johnson said. “But overall … there is some argument that the real concern is the market moved too far, too fast in the fourth quarter. … ”
While most retailers were expected to report holiday results Thursday, Wal-Mart gave Wall Street a preview of its sales, which were better than expected and sparked hope that other retailers would fare similarly.
Sales at Wal-Mart stores open at least a year rose 3 percent for December, prompted by strong after-Christmas sales. The company’s previous forecasts were in the middle of a 1 to 3 percent range. Wal-Mart gained 53 cents to $53.35.
Drugstore chain Walgreen jumped $2.01 to $40.38 after the company reported a 30.5 percent jump in profits, crediting increases in prescription and general merchandise sales. The company beat Wall Street earnings forecasts by 2 cents a share.
Kmart said its same-store sales fell 4.6 percent for November and December — which represents an improvement over past sales declines for the struggling discount retailer. Kmart climbed $1.15 to $100.10.
The big drop in oil prices hurt related stocks. ChevronTexaco slid $1.61 to $50.90, ConocoPhillips lost $2.72 to $84.11 and Exxon Mobil fell $1.17 to $50.09.