Stocks drifted lower early Friday as traders weighed the implications of spiking oil prices and interest rates on the last day of the first quarter. Index futures recently showed the S&P 500 trading 4 points below fair value, while the Nasdaq 100 was set for a 3-point decline. The 10-year Treasury bond was unchanged in price to yield 4.86%, while the dollar was higher against the yen and euro. The first three months of 2006 have been kind to investors, representing one of the best single quarters in three years. Heading into Friday, the Dow Jones Industrial Average is up 433 points, or 4%, since Dec. 31, while the S&P 500 has added 52 points, or 4.2%, and the Nasdaq Composite is up 136 points, or 6.2%. Rising bond yields have sapped the market's momentum in the quarter's closing days. At current levels, the yield on the 10-year Treasury note is at its highest point since June 2004, as traders have fretted that strong economic data will prevent the Federal Reserve from halting its rate-tightening campaign. The selloff in bonds hurt blue chips Thursday, with the Dow finishing down 0.6% at 11,151, and the S&P 500 losing 0.2% to 1300. The Nasdaq bucked the trend and rose 0.1% to 2341. On Friday, the Commerce Department is expected to say that personal income rose by 0.5% in February, and that personal spending edged up 0.1%. Two manufacturing reports are also due, with February factory orders expected to rise by 1.3% and the March Chicago Purchasing Manufacturers Index seen at 58.0, up from 57.0. Oil eased but remained ensconced above $66 a barrel, reflecting concerns that the stalemate around Iran's nuclear ambitions will end up stretching worldwide energy supplies. In electronic Nymex trading, May crude was recently down 45 cents to $66.70 a barrel.
Overseas markets are weaker, with London's FTSE 100 recently down 0.6% to 5979 and Germany's Xetra DAX losing 0.5% to 5952. In Asia, Japan's Nikkei rose 0.1% overnight to 17,060, while Hong Kong's Hang Seng fell 0.5% to 15,805. In corporate news, auto-parts supplier Delphi ( DPHIQ) is expected to ask a Bankruptcy Court judge for permission to scrap its labor contract and impose big wage and benefit cuts, reports say. The move could result in a strike. It could also have major implications for General Motors ( GM), Delphi's biggest customer. Some estimates say a strike could cost the automaker more than $100 million a day and worsen an already precarious financial situation. Business software maker Cognos ( COGN) said fourth-quarter earnings fell 19% from a year ago to $44 million, or 48 cents a share, while revenue edged down to $253.1 million. The results beat estimates, although shares eased late Thursday on a soft first-quarter outlook. In early stock research, Prudential downgraded Dow Chemical ( DOW) to neutral from overweight, citing lower demand. Friedman Billings raised T. Rowe Price ( TROW) to outperform, citing growth momentum.