In a low-volume session Friday, stocks finished higher amid an update on gross domestic product (GDP) data for the second quarter and an upwardly-revised read of consumer confidence. Oil prices finished flat.
The Dow Jones industrial average gained 21.6 points, or 0.21%, to 10,195.01. The broader Standard & Poor's 500 index added 2.68 points, or 0.24%, to 1,107.77. The tech-heavy Nasdaq composite index was up 2.68 points, or 0.24%, to 1,862.08, helped by the second day of gains among chip equipment stocks. Steel and metals groups were also higher.
Trading at the end of August is certainly light. "With that in mind, trading is apt to be choppy, with no true trend emerging given the languid activity expected in the coming days," notes economic research firm Informa Global Markets.
Next week is bound to be another low-volume affair, as many traders are on vacation, and others based in New York keep clear of the Republican National Convention being held in the city. Joe Liro, head of equity market research for Stone & McCarthy Research Associates, notes that "that will disrupt the information flow at least a little bit, which is a reason to be less involved [in the market]." But if the convention is uneventful, in a security sense, it should improve sentiment on the Street.
The major economic highlight in the week ahead is Friday's read of nonfarm payrolls, and the August employment report. Economists expect the unemployment rate to be 5.5%. Meantime, the August consumer confidence numbers arrive on Tuesday, and initial jobless claims arrive Thursday, along with updates on factory orders and inventories for July.
Next week's earnings calendar includes quarterly updates from Albertson's (ABS), Zale (ZLC), Accredo Health (ACDO), Bayer (BAY), Veritas DGC (VTS), and Del Monte Foods (DLM).
Crude oil futures were flat on Friday. October West Texas Intermediate (WTI) crude, which has fallen about $6 over the past five sessions, settled around $43.28. "Indications are pointing towards an end-of-the-week short-covering spurt, especially after five days of steady declines," notes economic research firm Informa Global Markets. Also lifting oil prices were reports of more attacks on Iraq's oil infrastructure, despite Thursday's peace deal in Najaf.
In economic news, the final reading of Michigan consumer sentiment for August arrived at 95.9, vs. earlier estimates of 94.0. The final July reading was 96.7. The economic conditions index was 107.9, up from 105.2 in July. The economic outlook index came in at 88.2 vs. 91.2 in July.
The second-quarter GDP revision showed that the economy grew in line with analysts' expectations, but at a somewhat slower pace than was initially reported -- at 2.8% annual pace, down from a prior reading of 3%.
Personal consumption spending rose a revised 1.6%, while final sales rose 2.1% The GDP price deflator was at 3.2%. Informa Global Markets says the "growth killer" for the second quarter is net exports, which are now at negative $588.7 billion, vs. a prior report of negative $552.8 billion. Inventories are at $57.7 billion, vs. a prior read of $47.5 billion. Action Economics says that the U.S. current account deficit will soar in the second quarter -- to a forecast $166.8 billion, up from $144.9 billion in the first quarter -- given the income figures in the GDP accounts.
Stocks moving on Friday included Novellus Systems (NVLS), which was 2.8% higher after the chip equipment maker said it expects third-quarter EPS of 37 cents. Management said that trends remain healthy, reports S&P's MarketScope. S&P cut its price target for Novellus, but reiterated its accumulate ranking.
Chiron (CHIR) has delayed shipment of its flu vaccine, Fluvirin, as a small number of lots did not meet the company's internal product sterility specifications. Chiron expects to release the vaccine in early October, and sees its 2004 EPS at the low end of its guidance. Both S&P and Baird downgraded the stock, which fell 8%.
Applied Materials (AMAT) was 2.6% higher following a Jefferies upgrade to hold from underperform.
In earnings news, Tech Data (TECD) posted second-quarter earnings of 52 cents per share, vs. 30 cents, on a 9.6% rise in sales. The company expects third-quarter sales as high as $4.8 billion. S&P maintained its hold rating, while First Albany has reportedly upgraded the stock to buy from neutral. Shares were unchanged.
Sporting goods retailer Sports Authority (TSA) posted second-quarter earnings (pro forma) of 45 cents per share, vs. 50 cents a year ago, on 3.8% lower same-store sales. S&P reiterated its avoid rating. Shares rose 8.8%.
U.S. Treasuries finished slightly lower in price Friday, following Federal Reserve Chairman Alan Greenspan's speech on demographic changes at the Kansas City Fed's annual monetary policy conference.
"Bond bulls who were disappointed that he did not comment on a slowdown in the economy were somewhat offset by those who were relieved he did not reiterate expectations for a pick up in growth following the second quarter swoon," notes Action Economics.
European stock markets finished higher on Friday. London's Financial Times-Stock Exchange 100 index rose 36.2 points, or 0.81%, to 4,490.1. Second-quarter GDP rose 0.9% in Britain, but the market was held back by a report that Britain's consumer confidence declined and news that Brent crude oil prices were higher, reports S&P's MarketScope.
Germany's DAX index gained 18.9 points, or 0.49%, to 3,851.18. A GfK report showed that German September consumer confidence fell to 2 from 3 in August. As in London, traders were cautious as oil prices headed higher. In Paris, the CAC 40 index ended 19.4 points higher, or 0.53%, to 3,649.24.
Asian markets finished higher on Friday. Japan's Nikkei 225 index added 80.26 points, or 0.72%, to close at 11,209.59. Traders absorbed some soft economic data, including a weak consumer spending report, reports Informa Global Markets.
In Hong Kong, the Hang Seng index gained 34.03 points, or 0.27%, to close at 12,818.42.