Stocks finished mixed to lower Thursday as October came to a close with more weak economic news. Some sellers emerged late in the session ahead of Friday's key updates on employment and manufacturing, which could pressure the Federal Reserve to cut interest rates next Wednesday.
The Dow Jones Industrial average declined 30.40 points, or 0.36%, to 8,397.03. The tech-heavy Nasdaq composite index was up 3.05 points, or 0.23%, to 1,329.78. And the broader Standard & Poor's 500-stock index fell 4.94 points, or 0.55%, to 885.77.
Friday's attention will turn to the early-morning release on the jobs market. MMS International, an economic research outfit, expects October nonfarm payrolls to rise 35,000 following the unexpected 43,000 drop seen in September. This forecast also includes the unemployment rate bouncing back up to 5.7% from 5.6% last month, and the workweek moderating back to 34.2 hours.
After the market opens, the ISM-manufacturing index for October is expected to moderate to 48.5 from September's 49.5. A reading below 50 means the factory sector is contracting. The September figure marked the lowest reading of the year due to concerns about demand in the short term, energy prices, and particularly the possible impact of a war with Iraq, notes MMS.
The earnings calendar isn't very heavy, with Cigna (CI) among the companies expected to release results.
On Thursday, the market had plenty of economic numbers to analyze that were mostly on the weak side. The October Chicago-PMI dropped more than expected, to 45.9 in October from 48.1 in September. A reading under 50 indicates contraction in manufacturing activity in the region. In the report, new orders declined to 47.7 from 49.2, and employment fell to 41.6 from 46.6, the lowest reading since April.
The Commerce Dept. reported the advance reading on third-quarter gross domestic product rose 3.1%, a bit lower than the 3.5% growth expected, and up from 1.3% growth in the second quarter. The economy was boosted by a solid 4.2% rise in consumer spending, including a 22.7% jump in durable goods. However, both exports and imports were up just over 2.0%, while government consumption rose 1.8%, notes MMS International.
Weekly jobless claims rose 16,000 to 410,000. And the employment cost index (ECI) for the third quarter rose 0.8%, vs. a 1.0% gain in the second quarter, a shade below expectations. The ECI data suggest that the lingering softness in the economy and the labor market is clearly helping to damp compensation gains, says MMS.
On the earnings front, Electronic Data Systems (EDS) reported better-than-expected third-quarter EPS of 18 cents, down from 44 cents a year ago, on a 3% revenue decline. The company plans to cut its workforce by 3% to 4%.
Martha Stewart Living Omnimedia (MSO) posted third-quarter EPS of 6 cents, down from 10 cents a year ago, on a 4% revenue rise to $70.9 million. The company, which has been under pressure because of the insider-trading scandal surrounding chairman Martha Stewart, lowered its earnings guidance for the fourth quarter.
Supermarket chain Albertsons (ABS) warned that a steeper than expected sales decline will likely cause third-quarter EPS to be 5%-10% below current guidance. The company also says it does not expect its business environment to improve anytime soon.
Treasuries finished higher after the weak economic data and ongoing speculation of interest rate easings in both the U.S. and potentially Europe next week. The 2-year yield at 1.68% remains entrenched below the Fed funds target, the 10-year yield fell below 3.90%, and the long bond cashed out below 5.0%, MMS says.
European markets ended higher. In London, the Financial Times-Stock Exchange 100 index gained 37 points, or 0.92%, to 4,039.70. In France, the CAC 40 added 65.82 points, or 2.13%, to 3,150.04. And in Germany, the DAX Index rose 39.26 points, or 1.26%, to 3,152.85
In Asia, the markets finished lower. In Japan, the Nikkei lost 116.11 points, or 1.33%, to 8,640.48 on disappointment with the government's watered-down plan released late Wednesday for anti-deflation and non-performing loans cleanup. The market was also hurt by pessimism about the U.S. economy ahead of today's key reports.
In Hong Kong, the Hang Seng fell 119.21 points, or 1.25%, to close at 9,441.25.