The major U.S. indexes came back after interest-rate hikes in Europe and Korea rattled world markets. Crude futures eased on news of terrorist Abu Musab al-Zarqawi's death
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Stocks finished mixed, recovering in the afternoon from heavy losses in early trading Thursday on bargain hunting after four days of losses and speculation the indices had reached a near-term bottom, says Standard & Poor's Equity Research. Global markets got slammed Thursday amid fears the uptrend in interest rates globally will drain liquidity from the markets, says S&P.
On Thursday, the Dow Jones industrial average rose 7.92 points, or 0.07%, to 10,938.82 -- after tumbling as much as 173 points in early trading. The broader Standard & Poor's 500 index was up 1.78 points, or 0.14%, to 1,257.93. The tech-heavy Nasdaq composite fell 6.48 points, or 0.3%, to 2,145.32.
The major indexes may have found some support in news from optimistic White House economists. President Bush's Council of Economic Advisers predicted the U.S. economy will accelerate from last year's growth pace of 3.2% to 3.6% in 2006 and inflation will remain tame. It forecasts inflation as measured by the CPI to rise 3.0% this year, down from 3.7% in 2005.
Interest-rate concerns continued to nag the markets Thursday. The European Central Bank raised its key interest rate, while the Bank of South Korea also unexpectedly raised its benchmark rate. In the U.S., investors increasingly expect the Federal Reserve to raise the federal funds rate to 5.25% when it meets at the end of the month.
Also hurting sentiment were the hawkish comments from Atlanta Federal Reserve Bank President Jack Guynn Wednesday, notes S&P, as well as the inversion of 10-year/two-year Treasury yield curve.
In company news, oil producers Exxon Mobil (XOM) and Chevron (CVX) were lower, as oil prices declined. In the energy markets, July West Texas Intermediate crude oil futures fell 47 cents to $70.35 a barrel, on reports that a U.S. air raid north of Baghdad killed Jordanian terrorist Abu Musab al-Zarqawi.
Some chipmakers were pressured after Citigroup lowered its earnings projections for Intel (INTC) and rival Advanced Micro Devices (AMD).
Meanwhile, Texas Instruments (TXN) was lower ahead of a mid-quarter update set for after the close of trading. National Semiconductor (NSM) was down before its fiscal fourth-quarter earnings report, also slated to follow the closing bell.
Shares in Novellus (NVLS), which provides semiconductor-making equipment, were higher after the company said it expects second-quarter earnings to come in higher than previously forecast.
Handheld-device maker Palm (PALM) was higher. After the close, the stock will replace Anteon International in the S&P MidCap 400.
On the economic front Thursday, initial jobless claims fell 35,000 to 302,000 for the week ended June 3, a bigger drop than expected. Separately, wholesale sales are expected to rise 1.2% in April, while inventories increase 0.7%, says Action Economics.
Coming Friday are reports on trade. The April trade deficit is expected to widen back out to $65.0 billion following the narrower-than-expected deficits in February and March. May import prices are expected to increase 0.6%, while export prices climb 0.3%.
European markets were trading lower. In London, the Financial Times-Stock Exchange 100 index fell 77.5 points, or 1.36%, to 5,628.8. Germany's DAX index slid 83.17 points, or 1.5%, to 5,460.76. In Paris, the CAC 40 index retreated 93.94 points, or 1.95%, to 4,730.83.
Asian markets finished sharply lower. Japan's Nikkei 225 index tumbled 462.98 points, or 3.07%, to 14,633.03. In Hong Kong, the Hang Seng index dropped 366.44 points, or 2.32%, to 15,450.11. Korea's Kospi index skidded 43.71 points, or 3.45%, to 1,223.13.
Treasury Market
Prices of Treasury issues edged up Thursday as investors sought the relative safety of U.S. government debt. "Rate hikes around the globe, including Europe, South Korea, Turkey, and India took a toll on equity sentiment and bled into the U.S. markets, with resulting asset allocation out of stocks and into Treasuries," says Action Economics. The yield on the 10-year note fell to 4.99%.
Hogan is a reporter for BusinessWeek Online in New York
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