Markets & Finance

Stocks Edge Up amid Solid Data, Oil Drop


Fourth-quarter U.S. productivity jumped, while labor costs slowed. Crude futures slid below $58 after failing for a third straight day to top $60

Stocks finished modestly higher in a choppy session Wednesday, as upbeat earnings news boosted tech names and investors weighed a solid report on U.S. productivity. Falling oil prices and a corresponding retreat in energy shares helped pull the Dow back down after crossing 12,700 for the first time ever.

On Wednesday, the Dow Jones industrial average edged up 0.56 points, or less than 0.01%, to 12,666.87, after bobbing above its all-time closing high of 12,673.68, set Feb. 1. The broader Standard & Poor's 500 index rose 2.02 points, or 0.14%, to 1,450.02. The tech-heavy Nasdaq composite climbed 19.01 points, or 0.77%, to 2,490.5.

NYSE breadth was positive, with 19 issues advancing for every 13 declining. Nasdaq breadth was 19-12 positive.

The recent sideways market could be good for stocks, some analysts say. "The market at present appears to have little impetus to either the upside or downside," says Richard Dickson, senior market strategist at Lowry's Reports. "On a longer term basis, this should be a positive for the market, as the ability to correct an overbought condition by trading sideways or though a shallow correction is considered to be a sign of strength."

In economic news, U.S. nonfarm productivity climbed 3% in the fourth quarter, following a modest 0.1% decline in the third quarter. Unit labor costs moderated to a 1.7% pace, from an upwardly revised 3.2% in the third quarter. "This is great news for the Fed," says Action Economics.

Meanwhile, Philadelphia Federal Reserve President Charles Plosser said the central bank may need to take further actions to reduce inflation. He also said the housing market may be stabilizing.

Treasury Secretary Henry Paulson told the House Budget Committee he supports a tougher regulator for mortgage companies Fannie Mae (FNM) and Freddie Mac (FRE).

Thursday's economic docket brings data on wholesale trade, consumer credit, and weekly jobless claims.

Oil prices dropped, weighing on corresponding shares. In the energy markets, March West Texas Intermediate crude oil futures fell $1.17 to $57.71 a barrel, giving up early gains despite a weekly inventory report revealing an unexpected decline in crude supplies. Crude futures failed for a third straight day to crack the $60 barrier.

Among Wednesday's stocks in the news, Cisco (CSCO) was higher after the networking equipment maker reported higher fourth-quarter earnings and forecast sales that would exceed analysts' estimates.

News Corp. (NWS) was higher after the media conglomerate logged a decline in earnings for its fiscal second quarter, but still topped Wall Street expectations.

Cigna (CI) was higher after the health insurer posted an 11% rise in fourth-quarter profit.

DirecTV (DTV) was higher after the satellite TV provider said its fourth-quarter earnings more than doubled.

Oil and natural gas producer Devon Energy (DVN) was lower after the company said fourth-quarter net income fell 40%.

Companies set to report earnings later Wednesday include Disney (DIS). The company was expected to report earnings of 39 cents per share on $9.5 billion in revenue, up from 35 cents per share on $8.9 billion a year earlier, says Reuters Estimates.

Among companies due to announce quarterly results Thursday are PepsiCo (PEP) and Qwest (Q).

Elsewhere, Nike (NKE) was higher after executives said they will add 100 new company stores in an effort to reach $23 billion in sales by 2011.

Equity Office Properties (EOP) was lower after Vornado Realty Trust said it was withdrawing its $23.2 billion buyout bid for the real estate company. Equity Office shareholders approved a $23 billion buyout offer from Blackstone Group.

In analyst calls, Tyco (TYC) was lower after Deutsche Bank lowered its recommendation on the company from buy to hold following Tuesday's disappointing earnings news.

European markets finished higher. The FTSE-100 index in London rose 23.2 points, or 0.37%, to 6,369.5. Germany's DAX index added 39.86 points, or 0.58%, to 6,915.56. In Paris, the CAC 40 index was up 26.22 points, or 0.46%, to 5,703.

Asian markets ended mixed. In Japan, the Nikkei 225 index lost 114.54 points, or 0.66%, to 17,292.32. In Hong Kong, the Hang Seng index gained 24.49 points, or 0.12%, to 20,679.69. Korea's Kospi index slipped 2.29 points, or 0.16%, to 1,426.29.

Treasury Market

Treasury yields dipped as strong demand for the Treasury Department's 10-year note auction countered the strong fourth-quarter productivity report. The 10-year note rose modestly in price to 99-02/32 for a yield of 4.74%, while the 30-year bond advanced to 94-17/32 for a yield of 4.85%.

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

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