Markets & Finance

Stocks Finish Modestly Lower


Stocks slipped on Wednesday after another spike in oil prices following a report showing a big drop in weekly gasoline

inventories. A number of corporate profit warnings also spooked investors. These factors outweighed calming words from Federal Reserve Chairman Alan Greenspan on economic growth, interest rates, and the dollar, according to Standard & Poor's MarketScope.

The Dow Jones industrial average was off 18.03 points, or 0.17%, to 10,811.97. The broader Standard & Poor's 500 index lost 0.33 points, or 0.03%, to 1,210.08. The Nasdaq composite index lost 3.25 points, or 0.18%, moving to 2,065.50.

Thursday's session will be busy in terms of economics news. A report on the services economy is expected to show a slight increase in February over the previous month. The Institute of Supply Management's gauge is seen rising to 60 from 59.2, according to Informa Global Markets.

In a separate release, a revised report on fourth quarter productivity is seen showing an increase of 1% vs. an earlier figure of 0.8%. Labor costs in the revised report are expected to have increased 2.1% in the quarter vs. 2.3%.

Pressuring stocks on Wednesday were a slew of profit warnings. Among them, TIBCO Software (TIBX) said that fiscal first-quarter profit and revenue will likely fall short of Wall Street's expectations.

Also warning was Verity (VRTY), a business software maker, which said its results would fall short of expectations.

Auto parts supplier Lear (LEA) sharply reduced its first-quarter earnings forecast.

Adding to the profit worries was news that April crude oil futures closed above $53 per barrel, prompted by a report showing a large drop in gasoline inventories and forecasts for continued cold weather in parts of the U.S. Higher oil prices can squeeze corporate profits and crimp consumer spending.

In economics news, Federal Reserve Chairman Alan Greenspan said the U.S. economy is growing at a "reasonably good pace" but he warned that the U.S. fiscal position is "unsustainable," in his prepared text to the House Budget panel Wednesday. Greenspan also said it is essential to take steps to raise national savings while he supports reforming Social Security sooner than later. He also called for "major" deficit-reducing actions.

The Fed chief was mum on future interest rate policy.

Not all of Wednesday's corporate news was bad. Warehouse retailer Costco (COST) posted nearly 35% higher quarterly profit but it still fell short of Wall Street's expectations.

Drugmaker Chiron (CHIR) said British regulators have cleared the company's Liverpool plant to start production of Chiron's flu vaccine in a move that should guarantee supplies for the next season.

Clothing maker Liz Claiborne (LIZ) posted 13% higher quarterly profits thanks to its portfolio and a diversification strategy.

Credit payment system operator MasterCard turned a profit vs. a year-ago period loss, thanks to fewer costs from a large merchant lawsuit settlement in 2003 and other legal settlements.

Titan (TTN), a U.S. defense group, posted a rise in profits.

Treasury Market

Treasuries finished lower in price Wednesday with the yield on the 10-year Treasury bill rising to 4.38%. Informa says Greenspan downplayed concerns that foreigners will stop buying U.S. dollar-denominated assets, including Treasuries. He sees little evidence that foreigners are dumping U.S. government debt while calling recent foreign selling of U.S. dollar assets as "technical". But concerns persist in the foreign exchange market that foreign central bank purchases of Treasuries may slow, especially out of Asia when and if China loosens its foreign exchange peg to the dollar.

World Markets

European stock markets closed mixed on Wednesday. In London, the Financial Times-Stock Exchange 100 was off 7.70 points, or 0.15%, to 4,992.80 as the effect of several companies trading ex-dividend weighed on the market: Hilton, ICI, BHP Billiton, Diageo, and Alliance Unichem.

Germany's DAX index gained 9.81 points, or 0.22%, to 4,393.93 with little in the way of fresh impulses to drive stocks back towards the 4,400 level. The anticipated attempt at the market's previous high water mark of 4,409.09 appears to have scared some investors into locking in some profits with some dealers reporting investors switching from defensive issues such as RWE and EON into techs such as Infineon and pharmas.

In Paris, the CAC 40 index gained 7.74 points, or 0.19%, to 4,062.72, sagging under the weight of banks and Total. Sanofi-Aventis remains in focus as the company and Pfizer have said that the U.S. FDA has accepted Exubera (inhaled dry powder form of insulin) for a new drug application filing.

Asian markets closed mixed on Wednesday. Japan's Nikkei-225 index rose 33.18 points, or 0.28%, to close at 11,813.71, the fifth higher finish in a row. Kurita Water jumped after Deutsche Bank upgraded the water treatment equipment maker to buy.

In Hong Kong, the Hang Seng Index lost 210.37 points, or 1.50%, to 13,850.78. Investors largely ignored news that unpopular Hong Kong Chief Executive Tung Chee-hwa had resigned. Sinopec deepened its early losses and tumbled 4.26% after U.S. oil giant Exxon Mobil Co announced that it sold its stake in the oil giant for US$1.37 billion.


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