During the week, strong economic data and lower bond yields helped lift the stock market, with the Dow Jones industrial average closing above 10,000 for the first time in 18 months. As for individual sectors, "weakness in consumer staples reflects weather-related worries about holiday sales and weaker earnings expectations at major retailers," according to S&P's weekly financial notes. Information technology suffered from lowered guidance from Intel (INTC
) and others, while continuing scandals weighed onfinancials. Energy was up sharply on higher oil and gas prices.
On Friday, the Dow finished up 34.0 points, or 0.34%, to 10,042.10. The broader Standard & Poor's 500 index ended up 2.93 points, or 0.27%, at 1,074.14. The tech-heavy Nasdaq Composite added 6.68 points, or 0.34%, to end at 1,949.00. Retailing stocks were lower, while oils were higher.
In economic news this past week, the Federal Reserve opted to hold the federal funds rate unchanged, which wasn't a surprise. But "the wording changes in the Fed's press release were put under the microscope in hopes that the tea leaves would reveal the future," says S&P chief economist David Wyss in his weekly financial notes. But they don't reveal much more than "that the near future of the funds rate is flat."
Topping economic news Friday, the University of Michigan's initial reading of Consumer Confidence Index for December was 89.6, vs. 93.5 in late November, much lower than the 96.2 that analysts expected. The economic conditions index stands at 93.6, vs. a prior 102.5, with the outlook index at 87.1 vs. 88.1. The current index has has fallen 6.1% since August, reports economic research firm, MMS International, while the outlook index is up 5.6%.
"This index is not strongly related to much of anything, but a reasonable guess is that less than hoped-for improvement in the labor market may be reflected here," says MMS. The Michigan data also suggest that consumers aren't spending as much this holiday season as was hoped.
The producer price index for November fell 0.3%, vs. October's 0.8% rise, lower than expected. "This partly reverses the big, and unexpected, gain in October," reports MMS. The core PPI fell 0.1%, vs. October's 0.5% rise.
The October trade deficit widened to $41.77 billion, from $41.34 billion, which was near expectations. Imports rose 2.1% to a record $129.7 billion, while exports rose 2.6% to $87.96 billion. From a year ago, imports are up 10.6%, while exports are up just 7.1%, says MMS International. "Both are outstripping GDP growth by a wide margin, generally taken as a healthy sign for both the domestic and world economies."
Larry Wachtel, a market analyst at Wachovia Securities, feels positive about the final weeks of 2003, saying the annual Santa Claus rally should be pretty reliable this month. "The latter part of December is usually better than the first part of the month, and we're now completing month No. 10 of a bull market," he says. "The economy is rolling along nicely, and the profit picture for the fourth quarter is going to be excellent."
In company news Friday, software outfit Adobe (ADBE
) finished 1% higher after posting fourth quarter earnings of 34 cents per share, vs. 17 cents (GAAP) on a 22% revenue rise. The company sees first quarter earnings as high as 36 cents, with revenue between $360 million and $380 million.
) has posted better-than-expected second quarter earnings of 9 cents per share, vs. 7 cents (GAAP) on a 26% revenue rise. The company sees third quarter (GAAP) EPS as high as 12 cents per share, on revenue as high as $31 million; and fourth quarter (GAAP) earnings as high as 39 cents per share on revenue as high as $119.5 million. McDonald upgraded the stock to 'buy.' S&P keeps its 'avoid' rating. The stock gained 17%.
) finished 2% higher, after maintaining its 11% to 12% EPS growth estimate, and saying it will buy back $2 billion in shares next year.
United Technologies (UTX
) ended 2.6% higher after saying that it is on track to achieve its previously anticipated 2003 EPS guidance of $4.65, and expects its 2004 EPS to fall within $5.00 and $5.30, estimated by analysts on about a 10% revenue rise.
Chinese Internet service provider, chinadotcom (CHINA
), says it intends to reorganize its mobile, portal unit into a wholly-owned subsidiary, chinadotcom Mobile Interactive Corp. (CDC Mobile). chinadotcome will also register an offering of CDC Mobile's American Depositary Shares. The stock gained 11%.
Advanced Digital (ADIC
) has posted fourth quarter earnings of 9 cents per share, vs. a 2 cents loss on 40% net sales. Bear Stearns has upgraded the stock to 'outperform' from 'peer perform.' The stock ended 5.2% higher.
In the banking sector, GA Financial (GAF
) agreed to be acquired by First Commonwealth Financial (FCF
), with GA Financial stock holders able to receive $35 in cash, or an equivalent value of First Commonwealth Financial stock for each GAF share held. GA Financial stock surged 20%.
In corporate news next week, Oracle (ORCL
) reports its second quarter earnings on Monday, Bear Stearns (BSC
) reports its fiscal and fourth quarter earnings n Wednesday, and Morgan Stanley(MWD
) reports on Thursday.
Economic news in the week ahead includes housing starts, the New York Empire State Index, and Capacity Utilization set for Tuesday. Initial jobless claims and the Philadelphia Fed Index arrive on Thursday.
Treasuries finished slightly lower in price Friday. The lower-than-expected read of December University of Michigan Consumer Confidence had lead investors to back off slightly from stocks early in the day.
The U.S. dollar finished at record lows against the euro ($1.228) and British pound ($1.746) in the wake of the Federal Open Market Committee minutes released Thursday that suggested interest rates would remain lower for an extended period. Meanwhile, gold reached an eight and one-half year high of $409.40 as the dollar slipped.
European stock markets finished slightly higher Friday. The bourses sold off following the dip in U.S. consumer confidence, but recovered before the close. London's Financial Times-Stock Exchange 100 index gained 16.3 points, or 0.38%, to 4,347.6 on some short covering, and bargain hunting before the weekend, according to S&P's MarketScope. The pound sterling remains up, at an 11-year high around $1.74 as U.S. rates stay lower. Sage Group, and Xstrata were both higher and active.
Next week, U.K. investors will get a read on unemployment Wednesday, and retail sales on Thursday.
In Paris, the CAC 40 finished up 2.7 points, or 0.08%, to 3,470.6, as French Industrial Production rose 1.3% in October, more than expected, and the fastest pace since August 2001. Meanwhile, imports rose, and the trade surplus narrowed. French Telecom was trading higher after winning government approval to lower its tariffs for high speed Internet services to phone operators and providers.
Germany's DAX index closed up 1.28 points, or 0.03%, to 3,860.13, off of an earlier, 15-month high level on hopes for a stronger economy. Automaker DaimlerChrysler was higher, as it raises its stake in Mitsubishi Motors' truckmaking unit.
Asian markets finished higher Friday. In Japan, the Nikkei 225 index rose 94.52 points, or 0.94%, to 10,169.66, on news that the Japanese economy continues recovering, and encouraged by a rise in the Nasdaq overnight. Tech and blue-chip stocks rallied, with Nikon adding 7.18%, Tokyo Electron rose 3.47%, and Advantest increased 3.38%. A 14% plunge in Softbank weighed on the market.
In Hong Kong, the Hang Seng index advanced 39.84 points, or 0.32%, to 12,594.42.