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Stocks finished modestly higher in choppy trading Friday, after a weak home sales report sent Treasury yields lower. Caution likely limited gains ahead of next week's two-day FOMC meeting, which starts Monday, says Standard & Poor's MarketScope.
The Dow Jones industrial average edged higher 3.68 points, or 0.09%, to 11,279.97, weighed down by Home Depot (HD) and ending the week relatively unchanged. The broader Standard & Poor's 500 index added 1.28 points, or 0.1%, to 1,302.95, a loss of 0.3% on the week. The tech-heavy Nasdaq composite index rose 12.67 points, or 0.55%, to 2,312.82, for a weekly gain of 0.3%.
The Fed meeting will be next week's focal point for Wall Street. Another 25 basis point rate hike is in the offing, says Action Economics, especially given a robust outlook for first-quarter growth and the potential for some pass-through of inflation pressures in the months ahead.
On Friday, a big drop in new home sales sparked hopes that interest rates will stop rising soon. "The Fed is going to have to do some serious thinking," says Peter Cardillo, chief market analyst with SW Bach. "We see the markets responding to that today."
New home sales unexpectedly plunged 10.5% in February to 1.1 million units, the Commerce Department said Friday. Separately, durable goods orders rose 2.6% after a revised 8.9% decline in January.
Investors were eyeing news about Google (GOOG). The Internet search giant was sharply higher on news the company will replace Burlington Resources (BR) in the S&P 500 index after the close of trading March 31. Rival Yahoo (YHOO) fell.
M&A activity was also in the spotlight. Lucent (LU) was higher on reports that French broadband equipment maker Alcatel (ALA) may buy the telecommunications giant.
In pharmaceuticals, Germany's Bayer (BAY) AG topped Merck KGaA's hostile bid for fellow German drugmaker Schering (SHR) AG. The companies are independent of similarly named U.S. outfits Merck (MRK) and Schering-Plough (SGP).
Outside deal news, automaker General Motors (GM) remained in focus. Shares were higher after news the company reportedly plans to fire hundreds of its U.S. salaried employees starting March 28.
In earnings news, networking company 3Com (COMS) was higher after posting a narrower loss for its fiscal third quarter but missing revenue targets.
Handheld device maker Palm (PALM) rose modestly after forecasting profit this quarter of 22 cents to 23 cents a share, excluding certain items.
Among other companines in the news, doughnut seller Tim Hortons (THI) was sharply higher in its first day of trading.
In the energy markets Friday, May West Texas Intermediate crude oil futures closed up 35 cents at $64.26 a barrel.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 46.2 points, or 0.77%, to 6,036.3. Germany's DAX index added 26.03 points, or 0.44%, to 5,973.14. In Paris, the CAC 40 index gained 23.93 points, or 0.46%, to 5,218.71.
Asian markets finished mixed. Japan's Nikkei 225 index rose 71.5 points, or 0.43%, to 16,560.87. In Hong Kong, the Hang Seng index fell 54.71 points, or 0.35%, to 15,716.46. Korea's Kospi index climbed 8.97 points, or 0.68%, to 1,321.23.
Treasury Market
Treasury yields sank on unexpectedly low new home sales and weak underlying durable goods data. Prices for 10-year Treasury notes were higher at 98-22/32 with a yield of 4.67%, while 30-year bonds rose to 96-29/32 for a yield of 4.69%.
Hogan is a reporter for BusinessWeek Online in New York
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