Markets & Finance

Stocks End Mixed on IBM, Sentiment News


The tech company's fourth-quarter results fell short of Wall Street expectations, while University of Michigan's consumer sentiment index hit a two-year high

Major stock indexes finished mixed Friday, as an unexpected surge in consumer sentiment countered disappointing quarterly results from IBM (IBM). Earnings reports will probably dominate the market's attention into the next week, with little major economic data on tap, says Standard & Poor's Equity Research.

On Friday, the Dow Jones industrial average edged down 2.4 points, or 0.02%, to 12,565.53. The broader Standard & Poor's 500 index rose 4.13 points, or 0.29%, to 1,430.5. The tech-heavy Nasdaq composite added 8.1 points, or 0.33%, to 2,451.31, helped by a rebound in chip stocks.

NYSE breadth was decidedly positive, with 23 issues advancing for every 10 declining. Nasdaq breadth was 18-12 positive.

A recent skid in energy prices could give the Federal Reserve room to stay on the sidelines, some analysts say. "A third consecutive weekly decline in crude oil prices and gradually dissipating inflation pressures were last week's key developments," says Bank of America senior economist Peter Kretzmer, in a note to clients.

Still, the current Goldilocks economic scenario may not last, others observe. "The economic news is currently benefiting from three strong tailwinds: falling energy prices, easy financial conditions, and (until mid-January) unseasonably warm weather," says Jan Hatzius, chief U.S. economist at Goldman Sachs, in a note to clients. "As some or all of these will be temporary, this makes it more difficult to assess the economy's underlying strength."

In economic news Friday, the preliminary January reading for the University of Michigan's consumer sentiment index rose to 98.0, its highest level in two years, from a 91.7 print in December.

Separately, Richmond Federal Reserve Bank President Jeffrey Lacker said inflation remains the primary policy risk to the U.S. economy, despite "tentative" signs of price pressures subsiding.

Next week's economic calendar gets off to a quiet start, picking up steam Thursday and Friday amid reports on existing and new home sales, weekly jobless claims, and durable goods. On Monday, leading indicators highlight the docket.

Investors will be sifting through a barrage of earnings reports. Companies due to announce quarterly results next week include Advanced Micro Devices (AMD), Bank of America (BAC), Johnson & Johnson (JNJ), Yahoo! (YHOO), AT&T (T), Microsoft (MSFT), and Caterpillar (CAT).

Among Friday's stocks in the news, IBM was lower after the tech company said fourth-quarter hardware sales rose 4.3%, less than expected, from a year earlier.

General Electric (GE) was lower after the conglomerate reported a rise in fourth-quarter profits and said it may sell its plastics business.

A 3% jump in oil prices helped boost corresponding shares, such as Exxon Mobil (XOM). In the energy markets Friday, February West Texas Intermediate crude oil futures rose $1.51 to $51.99 a barrel, after briefly falling below $50 on Thursday.

Meanwhile, Citigroup (C) was modestly higher after the banking giant posted a drop in fourth-quarter earnings that still topped analyst forecasts.

In other earnings news, Motorola (MOT) was higher as the cell phone maker said it will cut 3,500 jobs after reporting a 48% decline in fourth-quarter earnings.

On the M&A front, Morgan Stanley's (MS) real estate arm agreed to buy CNL Hotels & Resorts for about $3.13 billion, or $20.50 per share in cash.

Elsewhere, Alcoa (AA) was higher after the aluminum maker's board authorized a repurchase of up to 10% of the company's common stock, or about 87 million shares. The board also approved a 13% increase in Alcoa's annual dividend, from 60 cents to 68 cents.

XM Satellite Radio (XMSR) was lower following news a judge denied the satellite radio provider's motion to dismiss a record-label copyright lawsuit over its digital download subscription service.

European markets finished higher. The FTSE-100 index in London rose 26.9 points, or 0.43%, to 6,237.2. Germany's DAX index climbed 57.55 points, or 0.86%, to 6,747.17. In Paris, the CAC 40 index climbed 59.66 points, or 1.07%, to 5,614.7.

Asian markets ended mixed. In Japan, the Nikkei 225 index lost 60.49 points, or 0.35%, to 17,310.44. In Hong Kong, the Hang Seng index gained 50.21 points, or 0.25%, to 20,327.72. Korea's Kospi index tumbled 22.65 points, or 1.64%, to 1,360.56.

Treasury Market

Treasury yields pressed higher on the much stronger than expected Michigan sentiment data and inflation warnings from the Fed's Lacker. The 10-year note fell in price to 99-00/32 for a yield of 4.77%, while the 30-year bond dropped to 94-11/32 for a yield of 4.86%.

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

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