Stocks Finish Mostly Flat

Buyers sat out the session as uncertainty on interest rates and oil prices continue.
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Updated from 4:07 p.m. EDT

Stocks took a zig-zagging route to end essentially where they started Thursday in a light but volatile session, as investors continued to be tentative amid concerns of higher interest rates and the situation in Iraq.

After falling in early trading, the

Dow Jones Industrial Average

clawed its way back over the 10,000 mark to finish down 34.42 points, or 0.34%, at 10,010.74. However, the index was unable to close above its technically significant 200-day moving average of 10,017.

The

Nasdaq Composite

added 0.44 points, or 0.02%, to 1926.03; and the

S&P 500

closed down 0.81, or 0.07%, to 1096.47. The 10-year Treasury note was down 9/32 in price to yield a 20-month high of 4.85%, while the dollar was sharply higher against the yen and also posted moderate gains against the euro.

Volume on the

New York Stock Exchange

was just over 1.4 billion shares, and advancers and decliners are about even. On the Nasdaq, over 1.5 billion shares changed hands, and decliners edged out advancers by about 5 to 4.

Barry Ritholtz, chief market strategist at the Maxim Group, said the recent action in the stock market has been marked, not by massive selling, but by a significant lack of buyers, along with spiking oil prices. He compared the action to that which took place in the days leading up to the invasion of Iraq in March 2003.

"In some ways, it seems like geopolitical distractions are taking potential investors' minds away from the market, and everyone's worrying about what's obviously an awful, messy situation in Iraq," he said. "The market's pretty evenly balanced between buyers and sellers, and anytime you manage to remove a big chunk of buyers, you end up with a serious move down."

In Iraq, Defense Secretary Donald Rumsfeld made a surprise visit to the Abu Ghraib prison, the site marking the center of the recent prisoner-abuse scandal which has led to widespread scrutiny of the U.S.-led occupation of the country. There, he said the Bush administration's lawyers are advising the Defense Department not to publicly release any more photographs of Iraqi prisoners being abused by U.S. soldiers.

Ritholtz acknowledged that any short-term resolution to the dire situation in Iraq seems unlikely, but he said decisive action from the

Federal Reserve

with respect to interest rates could provide a lift.

"Remember when the market was nervous waiting for the war to start (in March of 2003), and then after it started, they

stocks took off? Well, now everyone's nervous about interest rates, and I think if we get a fed funds increase, sooner rather than later, once that's behind us, the market will finally have some upside potential again," he said.

On the economic front, the government reported that its producer price index rose 0.7% in April, up from a 0.5% rise in March. Economists had expected the price-climb to cool to a rate of 0.3%. The core index, which excludes food and gas prices, held steady and in line with expectations at 0.2%.

Also, retail sales came in lower than expected in April, according to the Census Bureau, dropping 0.5% compared with a rise in March of 0.2%. Economists were expecting sales to fall only 0.2%. Excluding auto sales, however, retailers fared slightly better than expected, with sales declining 0.1% after economists predicted a 0.2% drop.

On the labor front, initial jobless claims filed in the week ended May 7 jumped by 13,000 claims to 331,000. Wall Street was expecting claims to total 325,000. The previous week's figure was revised up to 318,000 from 315,000.

Despite economic data that he characterized as "lousy," Barry Hyman, equity market strategist with Ehrenkrantz King Nussbaum, said he thinks the market is way oversold at this level, and he is bullish on stocks in the short term.

"The market is trying to hold here, understanding that the Fed has painted itself into a corner, and people are concerned about the direction of interest rates," he said. "The problems in the market are not going away, but earnings support the market. Inflation and higher interest rates restrict the market. Given these conditions, I'm optimistic in the short term. Longer term, I think we're stuck in a trading range."

"I like, and would act on, an extreme oversold technical market," he added. "I think that's the good part right now, and I would look at being a buyer."

Crude oil for June delivery gained 31 cents to $41.08 a barrel on the Nymex, setting a new all-time high, as traders continued to be concerned that OPEC is unprepared to meet the surging worldwide demand. The fear was echoed by

Wal-Mart

(WMT) - Get Report

, whose CEO voiced concerns that consumer demand would be held down in 2004's second half by higher gasoline prices.

In corporate news,

Dell

(DELL) - Get Report

provided another example of the market's recent tradition of reacting negatively to solid earnings news. The computer maker said its profits rose in the first quarter due to a resurgence in corporate demand for new technologies. It earned $731 million, or 28 cents a share, up from last year's $598 million, or 23 cents a share, but its shares recently lost $1.07, or 3%, to $34.73 in after-hours trading.

Before the opening bell, Wal-Mart

reported first-quarter earnings of $2.16 billion, or 50 cents a share, compared with $1.86 billion, or 42 cents a share, last year. Earnings from continuing operations were $2.2 billion, or 50 cents a share, 1 cent better than analysts' expectations. Its shares closed up 5 cents, or 0.1%, to $55.11.

The company said it expects second-quarter earnings of 60 cents to 62 cents a share. The Thomson First Call consensus estimate was for earnings of 60 cents a share. For the full year, the company expects earnings of $2.35 to $2.39 a share, about a penny higher than its previous forecast.

Wal-Mart is "encouraged by the strengthening economy and the improving apparel environment," said CEO Lee Scott. But the company is "concerned about the impact higher gasoline and petroleum prices will have on our customers."

Shares of

Walt Disney

(DIS) - Get Report

climbed 30 cents, or 1.3%, to $23.30 after it reported late Wednesday that it beat expectations for its second-quarter earnings, thanks to a strong performance from ESPN and increased travel to its theme parks. Its profit rose to $537 million, or 26 cents a share, from $314 million or 15 cents a share in the same quarter last year.

Tiffany

(TIF) - Get Report

posted a 12% jump in quarterly profits on Thursday morning, meeting expectations. The luxury jeweler posted first-quarter earnings of $40.3 million, or 27 cents a share, compared with $35.9 million, or 24 cents a share, in the same quarter last year. It shares tumbled $2.82, or 7.6%, to $34.08.Also,

Target

(TGT) - Get Report

beat consensus estimates for its first-quarter earnings by a penny. The retail giant earned $438 million, or 48 cents a share, up from $349 million, or 38 cents a share, in the same quarter last year. Its shares lost $1.18, or 2.7%, to $43.17.

Overseas markets were mixed, with London's FTSE 100 closing up 0.9% to 4454 and Germany's Xetra DAX up 1.3% to 3825. In Asia, Japan's Nikkei fell 3% to 10,825 and Hong Kong's Hang Seng dropped 1% to 11,397.

Inflation-related data will be in focus again Friday, with April's reading of the consumer price index due out at 8:30 a.m. EDT. Economists expect the index to slow down to an increase of 0.3% from the 0.5% reading in March. The core index, which excludes food and energy prices, is expected to slow to an increase of 0.2% from a 0.4% increase.

At the same time, the Census Bureau is expected to say business inventories grew by 0.4% in March, down from 0.7% in February.

At 9:15 a.m. EDT, the Fed is expected to report that industrial production jumped 0.5% in April after declining by 0.2% the month before. Economists predict that capacity utilization reached 76.7% from 76.5%. A half-hour later, the University of Michigan will publish May's preliminary reading on its consumer sentiment index, expected to hit 96, up from 94.2, the final figure reported for April.