Stocks closed up slightly as late-afternoon bargain hunting lifted prices. However, earnings warnings from blue-chip stocks American Express (AXP ) and Merck (MRK ) cast a shadow of uncertainty for most of the day, and added to concerns about the timing of a corporate recovery in 2002.
Both stocks are components of the Dow Jones industrial average, which ended with a small gain of 6.40 points, or 0.06%, to 9,894.81. The tech-heavy Nasdaq composite index gained 9.45 points, or 0.47%, to 2,011.38. The broader S&P 500 index inched up 0.31 points, or 0.03%, to 1,137.07.
"The market is trying to figure out which way it wants to go, but I don't know whether this will happen before year-end. Investors have a lot on their Christmas wish list. They want the economic outlook to stabilize, layoffs to ebb, and profits to improve," says Stephen Carl, a principal at U.S. Equity Trading, The Williams Capital Group.
Financial services giant American Express says it's laying off as many as 6,500 employees, mostly in travel units, and taking a fourth-quarter charge of up to $280 million. American Express cut 7,700 jobs earlier this year. The news came a day after No. 3 drug maker Merck predicted flat profits for 2002, which also hurt shares of Bristol-Myers (BMY ).
Investors also sold shares of energy trading giant Enron Corp. (ENE ) in the wake of its bankruptcy filing. Calpine Corp. (CPN ) tumbled after a press report compared the power producer to Enron, but UBS Warburg reiterated its strong buy on the stock, saying such claims have little substance.
On the data front Thursday, U.S. jobless claims are expected to be higher, which also could suggest more weakness in the job market. S&P also expects November retail sales, including food services, to drop 3.0%, and predicts the November producer price index, a measure of wholesale inflation, to drop 0.3%.
New twists on the war on terrorism could affect markets Thursday. In Los Angeles, two Jewish Defense League leaders were arrested in an aborted bomb plot, federal authorities say. The FBI reviewed a tape made by Osama bin Laden last month, which lawmakers say offered "convincing proof" of more terrorist attacks. Meanwhile, the FBI issued a "low level" alert to Texas schools after receiving vague threats about more terrorism in the area. Overseas, a U.S. Air Force B-1 bomber went down in the Indian Ocean. All four crew members were rescued.
Treasuries ended higher following the Fed's interest-rate cut Another bout of stock profit taking and benign data also boosted bonds.
On Tuesday the Fed lowered the benchmark interest rate by 25 basis points to 1.75% -- the 11th cut this year, and left the window open for more rate-cut trimming.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 40.80 points, or 0.79%, to 5,120.00, as drug stocks fell in reaction to Merck's warning. In France, the CAC 40 was off 41.26 points, or 0.91%, to 4,510.68. In Germany, the DAX Index dropped 84.95 points, or 1.65%, to 5,061.50, as Dresdner Kleinwort downgraded Deutsche Bank to hold and the German trade surplus unexpectedly widened in October.
In Asia, the markets soared. The Nikkei rose 327.61 points, or 3.13%, to 10,801.52, as better-than-expected results in parts of the Bank of Japan's December Tankan business survey indicated that conditions aren't as severe as previously thought. In Hong Kong, the market added 154.01 points, or 1.32%, to 11,847.06.
By Suzanne Robitaille