Stocks Slip on Dell Earnings
Disappointing earnings from PC giant Dell Inc. (DELL) and home builder D.R. Horton (DHI) led to selling among technology and homebuilding stocks, respectively. Energy issues sank along with crude oil futures.
Sentiment was also hurt by comments from European Central Bank President Jean-Claude Trichet indicating a willingness to remove stimulus measures.
Trading was sluggish amid talk about an equities correction after the market's lengthy rally, says S&P MarketScope.
On Friday, the 30-stock Dow Jones industrial average finished lower by 14.28 points, or 0.14%, at 10,318.16. The broad Standard & Poor's 500-stock index was down 3.53 points, or 0.32%, at 1,091.37. The tech-heavy Nasdaq composite index lost 10.78 points, or 0.50%, to 2,146.04.
On the New York Stock Exchange, 19 stocks were lower in price for every 11 that advanced. Breadth on the Nasdaq was 16-10 negative.
Recent underperformance in small-cap stocks suggests "an investor shift into high-quality stocks such as bellwether blue chip names may be taking place," says S&P technical analyst Chris Burba.
J.P. Morgan Securities raised its year-end target on the Standard & Poor's 500 index to 1160 from 1100, to reflect its higher 2010 earnings expectations. The brokerage also said that improvement in payrolls, stabilization in home prices, and greater M&A in 2009 versus 2008 could act as potential catalysts and push the index higher.
Treasuries were lower Friday afternoon. The 10-year note was lower in price at 100-03/32 for a yield of 3.371%, while the 30-year bond was off at 101-07/32 for a yield of 4.305%.
The U.S. dollar index was up 0.34 to 75.63 in what was seen as a short squeeze, according to S&P MarketScope. While Federal Reserve officials have not expressed concern over a weak dollar, traders fear a future inflation outbreak due to huge government debt, says S&P.
December gold futures, which fell at the outset Friday as the dollar index rose, were up $6.90 to $1,148.80 per ounce.
December West Texas Intermediate crude oil futures were lower at $76.73 per barrel.
Global stock markets on Friday took cues from Wall Street's negative performance in Thursday's session. In London, the FTSE 100 index was lower by 0.31%. The CAC 40 index in Paris fell 0.82%. Germany's DAX index declined 0.68%.
Japan's Nikkei 225 index finished lower by 0.54%. Hong Kong's Hang Seng index fell 0.83%. Shanghai's benchmark index shed 0.37%.
Brown Brothers Harriman currency strategist Marc Chandler said Friday that financial markets "appear reluctant to take on new risk with equities and commodities softer and most foreign currencies lower against the US dollar and Japanese yen."
There were no significant economic reports released Friday.
Traders remain worried about a weak economic recovery and a "double dip" recession. Economic report slated for the first three days of next week could offer further clues to the health of the recovery, including October existing home sales and durable goods orders, November consumer confidence, and revised third-quarter U.S. gross domestic product. Goldman Sachs' (GS) stock was slightly lower Friday following a Wall Street Journal report some of its largest shareholders have asked the company to cut the size of its bonus pool and pass along more of its profits to investors. Although the shareholders are not pushing for a huge cut, they feel that Goldman should better reward shareholders for this year's rebound, the paper said.
Valero Energy (VLO) said it would permanently close its Delaware City refinery -- a major sign of the sinking profitability of the U.S. refining business, according to a Wall Street Journal report. The move comes as weak demand for gasoline and rising inventories, combined with relatively high oil prices, have crushed refiners' earnings. Furthermore, experts and industry executives say that gasoline demand will never see the peak it reached in 2007, as biofuels and increasing energy efficiency cut into demand.
Treasury Secretary Timothy Geithner, as part of a grilling on Capitol Hill Thursday, was asked by a Republican lawmaker to resign. It is a call he is likely to hear again and again as next year's election campaign heats up. Earlier in the week, a Republican challenger for a U.S. Senate seat in Connecticut had demanded Geithner quit, lambasting him for being "cozy" with banks bailed out by the federal government. Two other Republicans have requested hearings into Geithner's handling of the bailout of insurer American International Group Inc.
Federal Reserve officials are stepping up scrutiny of the biggest U.S. banks to ensure the lenders can withstand a reversal of soaring global-asset prices, according to people with knowledge of the matter. Supervisors are examining whether banks such as JPMorgan Chase (JPM), Morgan Stanley (MS), and Goldman Sachs Group (GS) have enough capital for the risks they take, how much they know about the strength of their counterparties and whether risk managers have authority to influence bank practices and policies.
European Central Bank President Jean Claude Trichet said the ECB will remove liquidity in order to ensure the bank doesn't fuel inflation. "Not all our liquidity measures will be needed to the same extent as in the past," Trichet said at a conference in Frankfurt today. "Any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally." Trichet has already signaled the ECB is unlikely to renew its offer of 12-month loans to banks after the third installment in December.
An official Chinese paper rejected calls for a Yuan appreciation. The People's Daily overseas edition said that U.S. pressure on China to raise the value of its currency amounts to Washington abdicating responsibility for ballooning deficits and would impede the global economic recovery. The article said it is Washington's attempt to distract attention and shirk responsibility and make other countries, including China pay the bill.