Stocks ended Friday mixed in a narrow range on moderate trading volume. The day was marked by profit-taking after Thursday's hefty run-up, which was sparked by a report of increased manufacturing activity in December. Some negative earnings forecasts dampened investors' spirits, but major indexes all scored a winning week to ring in 2003.
"The market is absorbing profit-taking fairly easily," said Hugh Johnson, chief investment officer at First Albany. Johnson noted that volume should pick up substantially Jan. 6, as many investors were on the sidelines during a holiday-shortened week. "We will really get back to work seriously starting Monday," he said.
The Dow Jones industrial average finished down 5.83 points, or 0.07%, to 8,601.69. The broader Standard and Poor's 500-stock index slipped 0.43 points, or 0.05%, to 908.60. The tech-laden Nasdaq composite index moved ahead 2.17 points, or 0.16%, to 1,387.02.
Before the bell, home-improvement retailer Home Depot (HD) cut its earnings forecast for fiscal 2002. Home Depot shares plunged more than 14% Friday. The widely-held issue dragged on the Dow average and other home-improvement stocks.
Bank of America, in turn, issued a downgrade of Home Depot's main competitor Lowe's (LOW), though the company stuck with its current sales and profit forecasts. Lowe's shares fell 6.18%.
The Big Three auto makers all reported increased December sales Friday. The No. 2 U.S. auto maker, Ford (F), said that December 2002 sales rose 13% from the same month in 2001. The figure was adjusted to account for one fewer selling day in December 2002, vs. the prior-year period; the unadjusted increase was 8.2%.
The world's largest auto maker, General Motors (GM), reported a December sales gain of 36%. The other Big Three auto company, DaimlerChrysler (DCX), reported a gain of 1% for the same period. Despite the sales increases, all three companies saw shares fall Friday.
"The auto sales numbers for me are more important [than Home Depot]," said Johnson. "Put that alongside the report [on increased manufacturing activity Thursday] and it suggests the economy did a little better than expected in the month of December."
Electronics retailer Radio Shack (RSH) said it cut earnings estimates. The No. 3 electronics seller said fourth-quarter profits would fall short of previous expectations owing to slowing sales growth. The shares traded slightly higher Friday afternoon.
Health-care company Guidant (GDT) scuttled plans to acquire privately-held Cook Group after Cook's tests on a new heart device failed. Guidant consequently lowered 2003 earnings expectations. Shares in Guidant slipped more than 5% Friday.
On the positive side, drug store chain Walgreens (WAG) announced that it beat Wall Street first-quarter earnings estimates by a penny per share. Shares in Walgreens rose 6.8% on the good news.
The profit outlook was also upbeat from upscale shoemaker Kenneth Cole (KCP), which issued improved earnings guidance for the fourth-quarter. The rosier forecast drove the shares up 7.1% Friday afternoon.
In economic news Friday, November construction spending increased 0.3%, more than the expected 0.1%. Investors had little reaction to the uptick.
Next week's economic news should have more impact on the markets. President Bush is expected to release details of an economic stimulus plan on Jan. 7, while December employment data is due Jan 10.
On the corporate front, the first fourth-quarter 2002 earnings reports should begin to trickle in next week. The most noteworthy release: Dow component Alcoa (AA), expected Wednesday.
In commodities, oil prices continued to inch higher Friday, as doubts lingered about a quick resolution of Venezuela's general strike and uncertainty about Iraq added to supply concerns.
Prices of U.S. Treasuries were mixed Friday. Prices for the 10- and 30-year issues were up, the two-year note's price was flat, and the five-year note was down slightly.
Applying some pressure to Treasuries, Boston Federal Reserve President Cathy Minehan said to a Connecticut business group Friday that the economy was on track for a moderate recovery. Minehan's were the first public comments by a Fed policy-maker in 2003.
"Tepid bottom fishing, along with another strong day of higher crude prices kept stock gains in check, [and] helped take some pressure off the curve as well," notes economic research firm MMS International.
European markets closed lower Friday. In London, the Financial Times-Stock Exchange 100 index was down 4.60 points, or 0.11%, to 4,004.90. In France, the CAC 40 lost 7.14 points, or 0.22%, to 3,187.88. In Frankfurt, the DAX Index dipped 12.10 points, or 0.39%, to 3,092.94.
In Japan, the Nikkei 225 index was closed for the New Year's holiday. The Nikkei, which will resume trading Jan. 6, dropped 135.10 points, or 1.55%, to close at 8,578.95 on Monday, its last trading day of 2002. In Hong Kong Friday, the Hang Seng index gained 218.33 points, or 2.33%, to close at 9,583.85.