Consumer, Oil Worries Weigh on U.S. Stocks

The major indices generally trade lower as investors digest Microsoft's guidance, earnings and more dismal data.
By Sarina Penn ,

Updated from 1:04 p.m. EDT

New York's major averages tracked mostly in the red Friday as investors digested mixed earnings reports, resurging oil prices and a confirmation of poor consumer-sentiment numbers.

The

Dow Jones Industrial Average

recently was shedding 31 points to 12,784, but the

S&P 500

rose 1 point to 1390 after having posted declines for much of the day. The

Nasdaq Composite

, dragged lower by

Microsoft's

(MSFT) - Get Report

disappointing near-term guidance, was sliding 22 points to 2407.

"I think we're just seeing a normal Friday in a somewhat jittery market," said Steven Sheldon, CFA and principal with SMS Capital Management. "I think the market's just getting set up for next week's

Federal Reserve meeting, and oil prices continue to be rather volatile. Every day we're getting head-faked up and down."

Crude-oil futures, after sustaining a big drop Thursday, were ballooning in the new session on a raft of supply-disruption concerns.

News broke that a ship contracted by the U.S. military fired warning shots at two Iranian ships, which spurred worries of a U.S.-Iran conflict that could halt shipments from the Gulf. Also, militants in Nigeria said they had assailed another pipeline shortly following a recent attack on two others, and

Bloomberg

reported that Britain's

BP

(BP) - Get Report

will begin shutting down a major North Sea pipeline tomorrow ahead of a planned refinery strike in Scotland.

Crude was jumping $2.81 to $118.87 a barrel, and gold futures were also taking back some of yesterday's losses, lately climbing $2.90 to $889.70 an ounce.

The dollar continued to climb against the euro, however, recently adding 0.5% at $1.5614. Against the yen, the greenback was off slightly at 104.32.

On the data side, the University of Michigan's April consumer-confidence reading was revised slightly downward to 62.6 in April, a dismal level not seen since the early 1980s. That's about 7 points lower than March. The survey found that 9 out of 10 American consumers believe the U.S. is already in recession.

Still, said Peter Morici, a business professor at the University of Maryland and former director of economics at the U.S. Trade Commission, "My feeling is that this data is not unexpected."

"Economists have a lot of trouble with sentiment data," Morici added. "It's harder to predict that translating into actual purchases and sales. My feeling is, someone drives past the gas pump and you call the guy up and ask how he feels, and he says he feels bad. So it's not that big a deal."

Separately, President Bush announced that the federal government's tax-rebate checks will begin shipping out Monday, a week ahead of schedule. The cash is intended to help stimulate the sluggish U.S. economy by giving strapped consumers some extra spending money.

As for corporate news, Microsoft shares sagged 6.3% after the software giant offered fiscal fourth-quarter profit guidance that leans to the lower end of analyst targets, even as it projected more robust numbers for fiscal 2009 and bested last quarter's expectations.

Disk-drive maker

Western Digital

(WDC) - Get Report

beat top- and bottom-line analyst views for the fiscal third quarter, and issued in-line profit guidance for the next, but also said a bigger-than-expected decline in demand for its products should weigh on current-quarter sales. Revenue was projected at $1.825 billion to $1.9 billion, the midpoint of which is a bit below the Wall Street consensus. Shares were tumbling 9%.

On a brighter note,

American Express

(AXP) - Get Report

gave support to the Dow after its first-quarter profit drop wasn't as steep as analysts were expecting, thanks to its international presence. The credit-card company also reaffirmed its above-consensus view for the full year. Shares tacked on 3.4%.

Goodyear

(GT) - Get Report

was also having a good day, lately climbing 7.5%, after the tire maker reported swinging to a profit on a "record" top line of $4.9 billion. The company also trounced Street profit views on an adjusted basis.

Among the day's research calls,

Wal-Mart

(WMT) - Get Report

was upgraded to buy from neutral at Merrill Lynch, while

Ford

(F) - Get Report

was downgraded at JPMorgan, Bear Stearns and Merrill a day after the automaker's earnings-inspired rally. Wal-Mart shares were off marginally as Ford plunged 9.1%.

Oppenheimer initiated three ethanol stocks,

Pacific Ethanol

(PEIX) - Get Report

,

VeraSun

(VSE)

and

Aventine Renewable Energy

(AVR)

, with perform ratings, lifting shares by between 3% and 8%. Citigroup upgraded China-based Internet stocks

Baidu.com

(BIDU) - Get Report

and

Sohu.com

(SOHU) - Get Report

to buy from hold, and shares were rising roughly 5% apiece.

Treasury prices were losing some ground. The 10-year note lost 9/32 in price to yield 3.86%, and the 30-year bond lost 20/32 in price, yielding 4.59%.

Overseas markets were mixed. In Asia, Tokyo's Nikkei 225 jumped 2.4% overnight, and the Hang Seng Index in Hong Kong declined 0.6%. As for European bourses, the FTSE 100 in London, Germany's Xetra Dax, and the Paris Cac were each rising 0.7% or more.

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