Stocks finished Wednesday mixed, as the Dow gave in to pressure from steep losses in Eastman Kodak (EK) and profit-taking on gainers earlier in the session. Tech stocks pocketed gains.
"We've had a trend recently where we're down in the morning and up in the afternoon," says Scott Bleier, chief investment strategist at Prime Charter. "Earnings are perceived to have [bottomed out]. All of the nervous sellers are seemingly flushed out." Bleier says the Treasury's surprise move to discontinue the benchmark 30-year note also helped stocks.
Early in the session, Wall Street was relieved by the government's preliminary figure on third-quarter GDP -- a decline of 0.4%. The figure, which represents the steepest decline since 1991, indicates the economy is in recession, but is also less severe than expected. S&P MMS had forecasted a retraction of 1.2%. The GDP figure will later be revised.
"The stronger-than expected GDP numbers puts the skids on the two-day sell-off and positive news from Sun Microsystems and Intel help to send techs higher. Although the market traded
off at mid-day, an afternoon surge in volume helped sustain the gains," says Stephen Carl, principal and head of U.S. equity trading at The Williams Capital Group.
On the Dow, strength in issues like Intel Corp. (INTC) and Wal-Mart (WMT) outpaced weakness in Eastman Kodak, which finished off close to 8% in afternoon trading. The film and camera company's credit rating was downgraded Tuesday.
The Dow Jones industrial average finished off 46.84 points, or 0.51%, to 9,075.14. The tech-heavy Nasdaq composite gained 22.80 points, or 1.37%, to 1,690.21. The broader Standard & Poor's 500 index lost 0.78 points, or 0.07%, to 1,059.01.
In other economic news, the October update on the Chicago Purchasing Managers Index showed a decline to 46.2. S&P was expecting the manufacturing gauge to fall harder, to 44.0, from 46.6. A figure below 50 suggests a contraction in activity.
The updates to GDP and the PMI index came on the heels of the latest report on consumer confidence, which dropped more than expected in October to a seven-year low.
Several other key reports will be released in the later part of the week -- and investors have been eyeing them nervously. Some economists expect the U.S. economy will perform poorly in the fourth quarter, with the events of September 11 hanging over the economy.
On Thursday, personal income will be released for September. The latest updates on NAPM, a key gauge of manufacturing activity, and construction spending are also due on Thursday. On Friday, traders will look to the much anticipated October employment report for direction.
Among Wednesday's stocks in the news, voice and data services provider Qwest Communications International Inc. (Q) said it posted a third-quarter loss on flat revenues as the weak economy and slower network capacity sales offset strength in wireless and data services.
Meanwhile, consumer products company Sara Lee Corp. (SLE) said net income dropped by about 5% over its fiscal first quarter due to higher marketing expenses.
U.S. Treasuries finished with hefty gains ground across the board after the Treasury's unexpected move to discontinue 30-year bonds and cancel January buy-backs. Treasuries soared to their biggest one-day gains in 14 years after the news. While the government's borrowing needs will be elevated for the next year or so, it should return to a surplus condition after that, the Treasury says.
Treasuries have been strong all this week as investors have shunned stocks amid a drop in consumer confidence, government warnings of a near-term terrorist threat, fears of more weak data ahead and growing suspicion of a half-point interest-rate cut at its policy meeting on Nov. 6.
European markets jumped initially, but finished with more modest gains, after the better-than-projected preliminary U.S. GDP number. The indexes were helped by gains in shares of France's Alcatel and Vivendi. In London, the FTSE 100 index ended higher by 36.10 points, or 0.72%, to 5,039.70. ignoring a survey that showed British consumer confidence slumped.
The Paris CAC 40 index finished up 89.36 points, or 2.10%, to 4,341.29. In Germany, the DAX index inched up 15.15 points, or 0.33%, to 4,559.13. In Euroland, European Central Bank Chairman Essing says the bank won't neglect its priority of stablize prices. The ECB is under tremendous pressure to cut rates soon to bolster slumping economies. Essing says he sees good reasons for inflation of below 2%.
In Asia, markets finished lower. Japan's Nikkei dropped 146.48, or 1.39%, to 10,366.34, finishing down for the fourth straight session. Investors in Japan fretted over profit cautions from high-tech manufacturers and the recent slide on Wall Street. In Hong Kong, the Hang Seng index finished near breakeven, down 2.46 points, or 0.02%, to 10,073.97.