Investors weighed mixed economic data on Friday, including a sharp drop in new home sales, along with news that Warren Buffett is starting a bond insurance firm
Stocks finished little changed Friday on the next to last trading day of the year. Investors weighed a big decline in new home sales and a better than expected read on a regional factory sentiment gauge.
Big banks hit by the credit crisis, including Citigroup (C), may consider selling off assets and units to raise more capital, says the Wall Street Journal. Also, investor Warren Buffett ventured into the bond insurance business, filling a void left by the shaky finances of many firms that insure municipal bonds.
Thursday's assassination of former Pakistani Prime Minister Benazir Bhutto, which sparked a sell-off in U.S. stocks the previous day, continued to rattle traders, Standard & Poor's MarketScope said.
On Friday, the Dow Jones industrial average finished higher by 6.26 points, or 0.05%, at 13,365.87. The broader S&P 500 index gained 2.22 points, or 0.15%, to 1,478.49. The tech-heavy Nasdaq composite index lost 2.33 points, or 0.09%, to 2,674.46.
Action in the broader market was mixed, with 16 shares advancing in price for every 15 that declined in New York Stock Exchange trading. Nasdaq breadth was 16-13 negative.
Friday's session was marked by last minute “window dressing” – whereby money managers squared their portfolios for the year end – and tax-loss selling, according to S&P MarketScope.
The bond market will close early on Monday, Dec. 31, and all financial markets will be closed on Tuesday, January 1 in observance of the New Year's holiday. The stock market will have regular trading hours on Monday.
Looking at next week's data calendar, traders will be eying fresh data on the housing sector, manufacturing, and the labor market. Monday brings a report on existing home sales for November. On Wednesday, November construction spending will be released, along with the December Institute for Supply Management manufacturing index. The minutes from the Dec. 11 FOMC meeting will also be released.
Thursday brings weekly initial jobless claims, November factory goods orders, and December vehicle sales.
The main event, though, will be Friday's release of the December employment report. The median forecast calls for nonfarm payrolls growth of 66,000, with the jobless rate holding at 4.7%.
Friday's release of the December ISM Non-Manufacturing index rounds out the week.
In economic news Friday, U.S. new home sales plunged 9% to a 0.647 million unit annual rate in November, from a downwardly revised 0.711 million in October (0.728 million previously). Markets expected a more modest decline to 0.715 million.
Declines were across three of the four regions, excluding the West, which was up 4.0% from last month. The month's supply of homes for sale rose to 9.3 from 8.8. The median home price rose to $239,100, versus an upwardly revised $229,500 in October (previously $217,800). Prices are down 0.4% over last year.
The December Chicago purchasing managers' index (PMI) improved to 56.6 (higher than economists' median forecast of 52.0) from 52.9 in November. New orders improved, while shipments and employment both fell. Prices paid dropped to 63.8 from 76.2.
The Chicago PMI was significantly stronger than expected, notes Bear Stearns economist John Ryding, but the new home sales data was "miserably weak". "[O]nce again, it is too soon to talk about stabilization in housing activity", he wrote in a note Friday.
Oil futures, up Thursday on inventory draws and Bhutto's murder, fell on late profit taking. February NYMEX crude oil futures, which hit a $97.85 intraday high, fell 62 cents to $96.00 per barrel Friday.
The dollar index was down 0.38 to 76.23 on Friday on prospects for lower interest rates.
Among Friday's stocks in the news, Citigroup could sell as much as $12 billion in "noncritical assets" to raise capital, including its student loan unit, an auto loan business and a Brazilian credit card unit, the Journal reported.
Buffett's Berkshire Hathaway (BRK.A) will open Berkshire Hathaway Assurance Corp., a business that will insure municipal bonds. Unlike other competitors in the space, such as MBIA (MBI) and Ambac (ABK), which have been hit by exposure to subprime loans and other risky credit, Berkshire Hathaway's credit rating is pristine. Also Friday, insurer ING Group (ING) said it will sell its reinsurance unit to Berkshire Hathaway for about $435.7 million.
Christopher & Banks Corp. (CBK) reported earnings of 29 cents per share in the third quarter, vs. 24 cents a year ago, as same-store sales rose 9% and total sales jumped 13%. The retailer expects a flat to low-single-digit decline in same store sales in the fourth quarter.
European indexes finished with modest gains Friday. In London, the FTSE 100 index fell 0.32% to 6,476.90. In Paris, the CAC 40 index shed 0.23% to 5,627.25. Germany's DAX index gained 0.36% to 8,067.32.
Major Asian indexes, given their first chance to react to Bhutto's killing, fell Friday. Japan's Nikkei 225 index was down 1.65% to 15,307.78 and Hong Kong's Hang Seng index lost 1.7% to 27,370.60, while Shanghai's benchmark index dropped 0.89% to 5,261.56.
Bonds moved higher in a flight to safety Friday. The 10-year note was higher at 101-06/32 for a yield of 4.104%, while the 30-year bond was up at 107-29/32 for a yield of 4.515%.