NEW YORK (AFX) - businessminute
Wall Street ended a record-setting week narrowly mixed Friday, with the Dow
Jones industrials falling to close inches above 12,000 after a lackluster profit
report and forecast from Caterpillar Inc. prompted many investors to retreat.
The Dow was up for the week, but broader market indicators were mixed.
Caterpillar, one of the 30 blue chip stocks that comprise the Dow, unnerved
investors who have bet that the slowing economy would pull off a soft landing
rather than tip into recession.
"Caterpillar must have taken about 60 to 70 points off the Dow," said
Stephen Carl, head of equity trading at The Williams Capital Group.
It was optimism about the economy and rising hopes for strong third-quarter
earnings that had lifted the Dow into uncharted territory this week. The blue
chip index, reaching its first 1,000-point milestone in 7 1/2 years, traded past
12,000 for the first time Wednesday and had its first close above that mark on
Thursday.
The Dow closed down 9.36, or 0.08 percent, at 12,002.37.
Broader stock indicators showed modest gains after spending much of the
session with losses. The Standard & Poor's 500 index was up 1.64, or 0.12
percent, at 1,368.60, and the Nasdaq composite index rose 1.36, or 0.06 percent,
to 2,342.30 following a strong showing by Google Inc.
The Dow rose 0.35 percent for the week, while the S&P gained 0.22 percent
and the Nasdaq fell 0.64 percent. The Dow had shown triple-digit point gains in
each of the previous three weeks. Despite the overall gains in the market, the
S&P stands about 10.4 percent below its high close of 1,527.46 and the Nasdaq is
even further off, about 54 percent. All three indexes had peaked in early 2000
before plunging in response to the dot-com bust, recession and the aftermath of
the 2001 terror attacks.
Bonds showed little movement Friday, with the yield on the benchmark 10-year
Treasury flat with 4.79 percent from late Thursday. The dollar was mixed against
other major currencies, while gold prices fell.
Light, sweet crude settled down $1.68 at $56.82 a barrel at the New York
Mercantile Exchange. Oil fell to new lows for the year Friday amid skepticism
about whether OPEC would fully implement a greater-than-expected production cut.
The disappointing earnings forecasts punctured some of the market's optimism
about the economy; data indicated that the economy is gently moderating have
contributed to a memorable first three weeks of October on Wall Street. Earlier
this month, the Dow became the first of the market's big indexes to move past
record levels set back in 2000, and it cemented that recovery with this week's
move past 12,000. The Dow traded as high as 12,049.51, and set a new closing
record of 12,011.73.
Joe Battipaglia, chief investment officer at Ryan Beck & Co., contends that
while earnings reports have been sound overall, companies are coming in with
more guarded forecasts. He also is concerned that falling oil prices could
indicate the economy is slowing too quickly.
"Caterpillar today was sort of a splash of cold water on the notion that
this economy is in the perfect place and will continue to be in the perfect
place," he said.
Caterpillar fell $10.02, or 14.5 percent, to $59 despite a 15 percent
increase in its third-quarter profit. Though the company sold more construction
and mining equipment, it warned increased operating costs and
weaker-than-expected sales would cut into its full-year profits.
Google, the Internet search company, jumped $33.61, or 7.9 percent, to
$459.67 after its profit nearly doubled and revenue surged 70 percent during the
third quarter, which is traditionally slower as people spend less time in front
of a computer during the summer months.
Investors heard from other Dow components Friday to cap off a busy week of
earnings reports.
3M Co. rose $2.07, or 2.7 percent, to $78.47 after posting a 6.4 percent
increase in its third-quarter profit amid renewed strength in its business of
making films for LCD television and computer screens.
Drug maker Merck & Co. advanced $1.15, or 2.6 percent, to $45.64 after
reporting stronger-than-expected earnings and revenue, though earnings were down
34 percent and sales were flat.
In other corporate news, SanDisk Corp., which makes flash memory chips, fell
$12.58, or 20.4 percent, to $49.15 after reporting a 4 percent decline in its
third-quarter profit and forecasting prices would fall by as much as 20 percent
in the fourth quarter.
Arch Coal Inc. was down $2.22, or 6.5 percent, to $32.04 after the company
lowered its full-year profit forecast because of weakness in the domestic
market. The company also said its third-quarter profit nearly tripled as
operating costs fell.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock
Exchange, where consolidated volume came to 2.57 billion shares, compared with
2.65 billion Thursday.
The Russell 2000 index of smaller companies was down 5.26, or 0.69 percent,
to 762.13.
Overseas, Japan's Nikkei stock average closed up 0.61 percent. Britain's
FTSE 100 closed down 0.01 percent, Germany's DAX index was up 0.41 percent, and
France's CAC-40 was up 0.29 percent.
The Dow Jones industrials ended the week up 41.86, or 0.35 percent, to
finish at 12,002.37. The S&P 500 index rose 2.98, or 0.22 percent, to 1,368.60.
The Nasdaq fell 14.99, or 0.64 percent, to end at 2,342.30.
The Russell 2000 index closed the week down 0.52, or 0.07 percent, at
762.13.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index
that measures 5,000 U.S. based companies-- ended the week at 13,717.72, up 21.41
points from last week. A year ago the index was 11,784.94.
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