Markets & Finance

Stocks Pull Back After Economic Reports


After three days of gains, the major indexes retreat after a slew of stronger-than-expected economic data

Stocks finished modestly lower Thursday, following 3 days of gains, while bond prices fell on stronger than expected reports that suggest the economy has more life than many had thought and the Federal Reserve won't be able to cut rates anytime soon, says Standard & Poor's Equity Research. It was in erratic trading session characterized by moderate holiday volume and yearend portfolio adjusting, S&P says.

The Dow Jones Industrial average fell 9.05 points, or 0.07%, to 12,501.52. The broader Standard & Poor's 500 index lost 2.11 points, or 0.15%, to 1,424.73. The tech-heavy Nasdaq composite was down 5.65 points, or 0.23%, to 2,425.57.

In economic news, U.S. existing home sales rose 0.6% to a 6.280 million pace in November from 6.240 million in October -- much better than forecasts for a 1% drop to 6.180 million units.

The Chicago purchasing manager's index rebounded to 52.4 in December after falling to 49.9 in November (the lowest level since April 2003). The employment index fell to 45.8, however, from 49.4. New orders climbed to 57.8 from 52.0. Prices paid were steady at 60.2.

December consumer confidence rose to 109.0 in December from a revised 105.3 in November (previously 102.9) -- also better than expected. The numbers will be largely overlooked in the wake of the firmer housing and Chicago PMI data, though should add to dollar and Treasury yield gains, says Action Economics.

And initial jobless claims rose 1,000.

Friday's docket is basically empty, and the bond market will close early ahead of the long weekend. But the first week of 2007 is heavy with critical data, including ISM, and ISM services, auto sales, and nonfarm payrolls, says Action Economics.

Among stocks in the news Thursday, Apple Computer (AAPL) CEO Steve Jobs was handed 7.5 million stock options in 2001 without required authorization from the company's board of directors, according to a report in the Financial Times.

Siemens and IBM (IBM) landed a shared $9.3 billion contract with the German military. IBM shares hit a new 52-week high after it was upgraded by ThinkEquity Partners analyst Eric Ross to buy from sell on Wednesday.

Alliance Data Systems (ADS) agreed to acquire Abacus from ad compan DoubleClick for $435 million. It expects the acquisition to add to cash earnings per share by a minimum of 5 cents in 2007, and neutral to GAAP earnings.

In the energy markets, February West Texas Intermediate crude oil futures rose 5 cents to $60.39 a barrel after EIA inventory data revealed a 8.1 million barrel fall in crude stocks. The Street had expected about a 1.7 million barrel decline. However, it appeared this was largely offset by a big gasoline stock build, says Action Economics.

European markets barely budged on Thursday. The FTSE-100 index in London fell 4.3 points, or 0.07%, to 6,240.9. Germany's DAX index rose 2.95 points, or 0.04%, to 6,611.81 in thin trading. In Paris, the CAC 40 index was down 6.65 points, or 0.12%, to 5,533.36.

Asian markets ended mostly higher. In Japan, the Nikkei 225 index edged up 1.66 points, or 0.01%, to 17,224.81. In Hong Kong, the Hang Seng index climbed 276.18 points, or 1.4%, to 20,001.91. Korea's Kospi index rose 9.36 points, or 0.66%, to 1,434.46.

Treasury Market

Treasury yields rose after the trifecta of firm data, which all came in higher than expected. The gain in existing home sales and Chicago-PMI (after rumors of a sub-50 print) were especially unfriendly to bonds, along with the surprise surge in consumer confidence into yearend, reports Action Economics. The 10-year note yield jumped 5 basis points to test the 4.70% area, and then settled at 4.69%.


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