Stocks moved lower on Friday as concerns about the economy and potential accounting problems at companies beyond bankrupt energy trader Enron led investors to cash in on gains after rallies in the two previous sessions. Tech shares bore the brunt of the selling. Investors weighed mixed economic news including a report that the nation's jobless rate dropped unexpectedly in January.
The Dow Jones industrial average ended down 17.30 points, or 0.17%, to 9,902.70. The Nasdaq Composite index eased 22.42 points, or 1.16%, to 1,911.61. The broader Standard & Poor's 500 index was off by 8.37 points, or 0.74%, to 1,121.83.
While key reports on gross domestic product and employment drove the market in the past few sessions, the U.S. economic data calendar is relatively sparse next week. The market instead will likely take its cues from the earnings reports of several big names, including networking gear maker Cisco Systems (CSCO ) and franchise operator Cendant (CD ), both expected on Wednesday. Filling out the week, communications company Sprint (PCS ) steps to the plate on Monday while rival WorldCom (MCIT ) is due up on Thursday. Drug company Pharmacia (PHA ) is scheduled to report earnings on Tuesday.
As far as economic data, the highlight is likely to come Wednesday when fourth quarter productivity is released. Standard & Poor's economic research unit MMS sees a gain of 1.7%. Prior to this, Tuesday brings a reading on activity in the sectors outside of manufacturing, otherwise known as the non-manufacturing ISM (NAPM) report. December factory orders are also expected.
On Thursday, figures on December consumer credit will be released while December wholesale inventories will be on tap for Friday.
This Friday, corporate earnings news was mixed. Entertainment giant The Walt Disney Co. (DIS ) beat earnings expectations for its fiscal first quarter, mainly because of cost savings. The company, however, posted a 55% drop in fiscal profits before an investment gain.
Computer services supplier Computer Sciences Corp. (CSC ), meanwhile, reported 33% higher third quarter profits, thanks to more business from the U.S. government outsourcing to commercial clients.
UAL Corp. (UAL ), the parent of United Airlines, posted a big fourth quarter loss although the results were better than what Wall Street had feared.
Advertising and marketing company TMP Worldwide Inc. (TMPW ) was hit with selling after Forbes magazine questioned its accounting practices, according to wire reports. The company said it was demanding a correction, according to the wires. After the Enron scandal, investors in generally have become fearful that other companies may have accounting problems.
On the economic data front, January's unemployment rate fell to 5.6% from 5.8%, versus expectations of an increase. But U.S. nonfarm payrolls fell 89,000. The monthly decline was less than that in December -- a 130,000 drop -- but was greater than expected as some economists were actually looking for a gain in January.
A key gauge of consumers' mood came in below Street expectations but at its highest level in a year, suggesting that Americans are more upbeat about their financial outlook. The University of Michigan final consumer sentiment index for January fell to 93.0 from a preliminary reading of 94.2 (88.8 in December). Expectations dipped to 91.3 from the 91.7 preliminary (82.3 in December), while present conditions were 95.7 from the preliminary 98.1 (99.0 December).
The Fed's decision Wednesday to keep its benchmark interest rate at 1.75%, ending a record 11 rate cuts in 2001, had cheered Wall Street. The Federal Open Market Committee maintained its easing bias, keeping the door open for additional rate cuts if necessary. The decision not to cut rates signals that the central bank sees the U.S. in recovery mode.
Meanwhile, Wall Street will keeping its eye on a not-so-key market indicator this weekend: the Super Bowl Market Predictor theory, which says the S&P 500 goes up for the year when the NFC team, or one that has NFL origins, wins the NFL championship game. (By those lights, investors should be rooting for the heavily-favored St. Louis Rams to defeat the New England Patriots in the Feb. 3 contest.) The theory has been right 77% of the time since the first Super Bowl in 1967, according to S&P MarketScope. But it's fallen on hard times recently, notes MarketScope, with the predictor pointing to the wrong market result in each of the last four years.
Prices of U.S. Treasury issues ended higher Friday on the decline in equities. Analysts expected trading to be rocky after the unexpected fall in the U.S. unemployment rate.
Meanwhile, U.S. construction spending rose 0.2% in December from a downwardly revised gain of 0.3% in November (from up 0.8% initially). The headline gain was right on target with the median forecast, but combined with the back revision, was weaker than expected, MMS says. For all of 2001, construction gained 5.8%, the smallest increase since 1995. Residential spending, low mortgage rates and unusually warm weather on the East Coast helped offset declines in nonresidential spending as commercial real estate was hit by the recession. Overall the data may prove moderately Treasury supportive, though slightly more disappointing for stocks.
European markets ended mixed. In London, the Financial Times-Stock Exchange 100 index was up 24.90 points, or 0.48%, to 5,189.70 after the UK Purchasing Managers Index rose to 46.4 from 45.2 in December, but a manufacturing index slowed a bit.
But in France, the Paris CAC 40 was lower by 6.31 points, or 0.14%, to 4,455.56.
And Germany's DAX index lost 10.55 points, or 0.21%, to 5,097.06 after the German Purchasing Managers Index rose to 44.3 from 43.5 in December. Surveys say EuroZone GDP will rise 0.3% in Q1.
Asian markets ended lower. Japan's Nikkei 225 index lost 206.37 points, or 2.06%, to 9,791.43 as losses deepened as investors squared positions prior to the weekend. Leading tech shares lower was NEC, with a 10.8% drop to after it doubled its fiscal year 2001 net loss forecast. S&P said that Japan's credit quality is likely to keep deteriorating in 2002, noting the country's "worrisome deflationary recession." This exacerbated fears of damage to banks' balance sheets from the growing number of corporate bankruptcies.
Hong Kong's Hang Seng index fell 34.05 points, or 0.32%, to 10,691.25.