Markets & Finance

Stocks Fall in Pre-Holiday Trading


A key inflation gauge held steady, while personal income and spending rose, as expected. Also in focus: Research in Motion

Stocks finished lower Friday, following a flurry of economic reports and a mixed bag of earnings news. Investors were taking profits in slow trading ahead of Monday's Christmas holiday, says Standard & Poor's Equity Research.

On Friday, the Dow Jones industrial average fell 78.03 points, or 0.63%, to 12,343.22. The broader Standard & Poor's 500 index dropped 7.54 points, or 0.53%, to 1,410.76. The tech-heavy Nasdaq composite was down 14.67 points, or 0.61%, to 2,401.18.

In economic news, the Fed's preferred inflation measure held steady amid a rise in consumer spending. The core personal consumption expenditures, or PCE, deflator was unchanged on the month, dipping to a 2.2% annual pace from October's 2.4% rate. U.S. personal income rose 0.3% in November, while consumption rose 0.5%. Overall, the report was in line with expectations, says Action Economics.

Separately, U.S. durable goods orders gained 1.9% in November, slightly less than expected, following an 8.2% skid in October. A 7.5% rise in computer orders and a 9.4% increase in transportation orders provided a boost after declining the previous month.

However, the durable goods report isn't as strong as it might appear, some analysts say. "Although the headline number is better than expected, the overall pattern is weak, and suggests a continued soft manufacturing sector," says David Wyss, chief economist at S&P.

The University of Michigan's final December reading on consumer sentiment advanced to 91.7, better than expected, from the 90.2 preliminary print.

Looking ahead, the calendar is relatively light next week, with markets closed Monday for Christmas. A report on November new home sales is due Dec. 27, followed by existing home sales, consumer confidence, and weekly jobless claims Dec. 28. A report on Chicago-area regional manufacturing activity closes the week.

Among Friday's stocks in the news, Toyota (TM) announced production goals for 2007 that should reportedly allow the Japanese company to overtake General Motors (GM) as the world's largest automaker.

Meanwhile, Ford (F) chief executive Alan Mulally reportedly called for a "gut-wrenching" overhaul.

In earnings news, Research in Motion (RIMM) was lower after the BlackBerry maker reported a 47% uptick in third-quarter profit amid market-share gains against rival Palm (PALM).

Drugstore chain Walgreen (WAG) was higher after the company posted a 25% jump in first-quarter earnings, surpassing Wall Street estimates.

Shares of Micron Technology (MU) gained after the chipmaker said first-quarter profit tripled on a 15% rise in sales.

Software maker Red Hat (RHT) was up sharply as a 37% drop in third-quarter profit nevertheless trumped analyst expectations.

On the analyst front, Qualcomm (QCOM) was lower after the wireless technology company lowered its first-quarter earnings forecast. J.P. Morgan downgraded the stock from neutral to underweight.

In the energy markets, February West Texas Intermediate crude oil futures fell 25 cents to $62.41 per barrel.

European markets finished mostly lower. In London, the FTSE-100 index rose 6.3 points, or 0.1%, to 6,190. Germany's DAX index fell 70.83 points, or 1.08%, to 6,503.13. In Paris, the CAC 40 index was down 56.45 points, or 1.02%, to 5,453.94.

Asian markets ended higher In Japan, the Nikkei 225 index gained 57.13 points, or 0.34%, to 17,104.96. In Hong Kong, the Hang Seng index advanced 97.68 points, or 0.51%, to 19,320.52. Korea's Kospi index nudged higher 1.02 points, or 0.07%, to 1,437.49.

Treasury Market

Treasury yields climbed after initially dipping on the flat core PCE reading. The 10-year note fell in price to 100-01/32 for a yield of 4.62%, while the 30-year bond dropped to 95-30/32 for a yield of 4.76%.

Hogan is a reporter for BusinessWeek.com in New York.

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