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Stocks Finish with Small Losses

Stocks ended slightly lower Wednesday, on a broad-based pullback as some futures traders began rollovers into March contracts. The Dow Jones industrial average ran into a brick wall at 10,000 on Tuesday, notes S&P MarketScope, similar to the Nasdaq's road-block at 2,000 last week.

The Dow Jones industrial average finished lower by 1.6 points, or 0.02%, to 9,921.8. The broader Standard & Poor's 500 index ended down 1.13 points, or 0.11%, at 1,059.05. The Nasdaq Composite index -- which was nearly 5% below its intraday high of last week -- dipped 3.67 points, or 0.19%, to 1,904.65.

Housing stocks fell, alongside the biotech, financial, brokerage and cyclical sectors.

The market's late afternoon dives this week have frustrated some analysts. "Markets climb walls of worry, and people are still worried," says Michael Farr, president and chief investment officer at Farr, Miller & Washington. "They're still looking for evidence and earnings, and that's a good thing... but the market's skittishness over the Fed report shows a very short-term, and emotional rather than considered response."

The Federal Reserve's Federal Open Market Committee (FOMC) left the Fed funds rate at 1% on Tuesday, as expected.

Verizon (VZ) says it expects to record a fourth quarter after-tax charge of about $2.8 billion, or 99 cents in EPS, related to its voluntary workforce reduction of 21,260 employees. The telecom services provider will also record a pension-related charge of $0.7 billion to $0.9 billion, after taxes, mostly in the first quarter of 2004. S&P sees Verizon challenged by the increasing competition from wireless and cable, and maintains its 'hold' rating of the stock. The stock added 2.4%.

In airlines, Southwest Airlines (LUV) finished unchanged after a Deutsche Securities upgrade to 'buy' from 'hold,' saying a steady rise in the airlines fares should help the company, and that price pressures will ease in 2004. Meanwhile, Northwest Airlines (NWAC) was upgraded from 'neutral' to 'outperform.' Northwest finished up 3.2%.

AutoZone (AZO) shed 12% after posting first quarter earnings of $1.35 per share, vs. $1.04 on 1% higher domestic retail same store sales -- though 17% higher AZ Commercial sales -- and 5.2% higher total sales. USB Piper has downgraded the stock to 'market perform' from 'strong buy.' S&P reiterated its 'accumulate' rating of the stock, but cut its targets.

Network Engines (NENG) slid 40% to $6.10, after amending its distribution agreement with EMC Corp. (EMC), saying that there will be a decline in the company's gross profit related to the sale of the EMC-approved host bus adapters (HBAs), which will have negative impact on Network Engine's distribution operations.

ESS Technology (ESST) jumped 11% higher, after raising its fourth quarter revenue guidance to a range of $79 million to $82 million, from an upward range of $68 million. Fouth quarter GAAP earnings per share are projected to be as high as 19 cents, up from 9 cents. The company cites strong worldwide demand for its digital entertainment products. Pacific Growth initiated coverage of the company with 'overweight.'

In pharmaceuticals, CV Therapeutics (CVTX) stock halted on Tuesday pending last night's news from a Food and Drug Administration panel that said that U.S. regulators should require more research before deciding whether to approve CVTX's Ranexa. Bear Stearns cut its rating of the stock to 'underperform' from 'peer perform.' The stock finished 7.7% higher.

CIBC World downgraded Conceptus (CPTS), the maker of a permanent birth control device for women, to 'sector perform' from 'sector outperform' ahead of the company's conference call to be held after today's close. The stock dipped 5%.

Homebuilder Toll Brothers (TOL) reported fourth quarter earnings of $1.19 per share, vs. 93 cents on a 28% revenue rise. The company says that it's on track for more than 20% net income growth in fiscal 2004, and 2005. The stock ended down 4%.

Companies expected to issue earnings updates on Thursday include tech companies Adobe (ADBE), Ciena (CIEN), and Verity (VRTY).

On the economic front, initial jobless claims, November retail sales and inventories data dominate Thursday. An update on producer price index and a preliminary read on the University of Michigan Consumer Sentiment index is due Friday.

Treasury Market

Treasuries finished slightly higher Wednesday, following the $16 billion 5-year note auction, and the Tuesday selloff caused by the FOMC decision to leave the Fed funds target rate at 1%. The dollar made some small gains after the Bank of Japan bought greenbacks, but the dollar remains low against the Euro (1.221) and at its lowest level in 11 years vs. the British pound (1.742).

World Markets

European bourses closed lower Wednesday. London's Financial Times-Stock Exchange 100 index finished down 44.2 points, or 1.01%, to 4,335.40. The pound sterling is at an 11-year high vs. the dollar. Chancellor of Exchequer Gordon Brown said that the U.K. would have to borrow more money to finance government spending programs. The Bank of England's Kate Barker says that homebuilders are limiting housing supply to keep prices high, and has called for radical steps to increase supply.

In Paris, the CAC 40 index dropped 17.27 points, or 0.5%, to 3,438.85. Remy Cointreau, Renault, and Rhodia stocks weighed on the index.

Germany's DAX index had lost 25.26 points, or 0.66%, to 3,820.92, on some profit taking. Some traders were nervous as Chancellor Schroeder struggles to win legislative approval for a $19 billion tax cut. German October exports fell 6.6%, the largest decline in 10 years.

Asian markets finished mixed, with Japan's Nikkei 225 index taking a 2.11% hit to finish below the 10,000 mark. The index lost 213.72 points, to finish at 9,910.56. In Hong Kong, the Hang Seng index crept 4.74 points higher, or 0.04%, to finish at 12,398.38.

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