Markets & Finance

Stocks Fall at Close of Record Year


Apple said an internal stock-options probe cleared top executives of any wrongdoing. Marsh & McLennan reportedly sells Putnam for $3.9 billion

Stocks finished lower Friday, as traders adjusted their portfolios in the last session of 2006, but each of the three major indexes posted double-digit gains for the year. Volume was thin, with no major economic reports on the calendar.

On Friday, the Dow Jones Industrial average fell 38.86 points, or 0.31%, to 12,462.66, for a 16.2% gain on the year. The broader Standard & Poor's 500 index dropped 6.45 points, or 0.45%, to 1,418.28, climbing 13.6% in 2006. The tech-heavy Nasdaq composite was down 10.28 points, or 0.42%, to 2,415.29, for a 9.5% annual increase.

NYSE breadth was negative, with 21 issues declining for every 13 advancing. Nasdaq breadth was 18-12 negative.

Wall Street wound down a year highlighted by a second-half rally, during which the Dow topped 12,000 for the first time. "2006 will probably go into the record books as one of those years in which almost everything went right," says Sam Stovall, chief investment strategist for S&P Equity Research.

Some analysts expect the Federal Reserve to begin cutting interest rates in mid-2007 as the current economic slowdown persists. "Although the drag from homebuilding will probably wane as the year progresses, increasing spillover effects into personal consumption and business investment are apt to keep real GDP growth around its current 2% pace," says Jan Hatzius, chief U.S. economist at Goldman Sachs, in a note to clients.

The NYSE and Nasdaq will be closed Tuesday to recognize former President Gerald Ford, who died this week. President George W. Bush has declared Jan. 2 as a "National Day of Mourning" in honor of the 38th president.

Investors will return from the four-day weekend to a full slate of economic data. The Institute for Supply Management's manufacturing report highlights the week's docket, which also holds releases on automotive sales, construction spending, factory orders, and employment.

Among Friday's stocks in the news, Apple (AAPL) was higher after the company said an internal probe into stock-options grants made between 1997 and 2002 found no misconduct by CEO Steve Jobs or other members of the current management team. The computer and iPod maker said it is restating its financial statements for 2004 to 2006 as a result of the investigation.

On the M&A front, insurer Marsh & McLennan (MMC) reportedly agreed to sell its Putnam Investments asset-management unit for $3.9 billion to Montreal-based Power Corp., three years after Putnam was caught up in a mutual fund trading scandal.

Meanwhile, AT&T (T) offered new concessions, including price caps on high-volume data lines, in an effort to win regulatory approval of its $85 billion buyout of BellSouth (BLS).

Alltel (AT) was higher following a report the cell-phone company may be a leveraged-buyout target.

In earnings news, Delta Air Lines (DALRQ.PK) reported a narrower November loss of $49 million, improving from a $181 million loss in the same period a year ago.

Elsewhere, Goodyear (GT) was higher as the tire maker said it expects to realize up $610 million in cost savings as a result of a three-year deal with the United Steelworkers union.

In the energy markets, February West Texas Intermediate crude oil futures rose 52 cents to $61.05 a barrel amid speculation of lower inventories, capping a year when crude hit 26-year highs on increased global demand.

European markets finished mixed on Friday. The FTSE-100 index in London fell 20.1 points, or 0.32%, to 6,220.8. Germany's DAX index shed 14.89 points, or 0.23%, to 6,596.92. In Paris, the CAC 40 index was up 8.4 points, or 0.15%, to 5,541.76.

Asian markets ended narrowly mixed. In Japan, the Nikkei 225 index edged up 1.02 points, or 0.01%, to 17,225.83. In Hong Kong, the Hang Seng index slipped 37.19 points, or 0.19%, to 19,964.72. Korea's Kospi index was closed after on Thursday rising 9.36 points, or 0.66%, to 1,434.46.

Treasury Market

Treasury yields rebounded in light trading after drifting overnight. The 10-year note eased in price to 99-14/32 for a yield of 4.7%, while the 30-year bond was little changed at 95-07/32 for a yield of 4.81%. The market is scheduled to be open Tuesday, but the Securities Industry and Financial Markets Association has recommended an early 2 p.m. Eastern close.

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

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