On a very quiet trading day, the major stock market indices drifted lower as new reports that showed continuing weakness in the economy put a damper on market festivities.
Revised numbers for first-quarter
gross domestic product, the most anticipated economic report this week, came in just under economists' expectations this morning. The GDP result was adjusted to 1.3%, down from a preliminary 2%, and below the 1.4% forecast. In other news,
durable goods orders for April were weaker than anticipated.
Ahead of the Memorial Day weekend, the
Dow Jones Industrial Average fell 117.05 points, or 1.1%, to 11,005.37. The blue-chip index is down 2.6% for the week. The
Nasdaq Composite Index lost 30.99 points, or 1.4%, to 2251.03, and is up 2.4% since last Friday.
Trading volume was the lightest so far this year on the
New York Stock Exchange. A little more than 800 million shares were in play on the Big Board today. About 1.4 billion shares changed on the Nasdaq, compared with an average of 1.8 billion to 2 billion shares. Given the absence of trading activity today, stock moves may have been exaggerated.
"We've run up a long way, and now we're selling off on some concerning data," said Peter Blatchford, a trader at
. "The numbers leave open the possibility that the Fed will be accommodating, but they can't lower rates to zero."
Investors digested last night's testimony from Alan Greenspan, in which he pointed to the risks of continued economic weakness. The Fed chairman left open the possibility for further rate reductions, but added that the five cuts since January should begin to work their way through the economy later this year. The market, say analysts, is now discounting a 25-basis-point cut in June.
Ever since May 15, when the central bank took the fed funds rate down to its lowest level since May 1994, the bulls have re-ignited faith in an economic recovery this year. The Dow is now up 17.2% from its two-year low of 9,389.48, which it reached on March 22. And it's up 2% for the year. The Nasdaq is up 37.4% from its recent low of 1,638.8, which it hit on April 4. But it's still down 8.9% this year.
University of Michigan's
consumer sentiment index rose to 92 in May from 88.4 in April. The consumer sentiment number for the latest month was revised down from a preliminary level of 92.6. And according to a separate report,
existing home sales for April fell 4.2%.
slid 1.5% to $49.95, putting pressure on the Dow. The diversified manufacturers' financial arm
agreed to provide $7 billion to financial services firm
An early upgrade on a trio of chip-equipment stocks by
helped semiconductor stocks this morning. The securities firm raised its ratings on
to strong buy from accumulate.
But despite the confidence boost, only Teradyne finished up on the day. The manufacturer of test equipment for semiconductors advanced 0.6% to $44.49. The
Philadelphia Stock Exchange Semiconductor Index
, which tracks the chip industry, fell 0.6%.
Positive earnings from
, a personal television recording service, lifted its stock 35% to $11.38. The company reported a first-quarter loss of $50.2 million, or $1.20 per share, slightly better than analysts' expectations of a $1.23 loss per share. The loss widened from a year ago, but the first-quarter number showed sequential improvement from the loss of $2 a share in the previous quarter.
Investors gave the cold shoulder to
, which missed analysts' consensus estimates, sending the shares down 17%. Yesterday evening, the company forecast a bottom line in the range of break even to a loss of 5 cents for the next quarter. ADC also said it may exit its nonstrategic business practices.
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Europe's major indices posted losses today. London's
fell 26.1 to 5889.9. Across the channel, the Paris
slid 74.5 to 5581.9, while Frankfurt's
lost 52.4 to 6226.5.
Asian stocks also closed down overnight. Tokyo's key
lost 129.9 to 1,3765.9. Hong Kong's
sank 56.6 points to 13,7540.
Except for some intermittent selling, the European and Asian indices have been rising steadily since March, when most of them hit lows not seen in 18 months or more.
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