Stocks finished mixed Thursday, as economically-sensitive stocks fell amid worries about higher interest rates and tech stocks rebounded. Buying picked up in the last half hour of trading.
The Dow Jones industrial average lost 21.80 points, or 0.21%, to 10,479.84, dragged by losses in General Electric (GE ), financial and cyclical stocks. The broader Standard & Poor's 500 Index added 1.74 points, or 0.15%, to 1,153.59.
The Nasdaq composite index added 35.96 points, or 1.96%, to 1,868.83, led by familiar tech stocks such as Microsoft (MSFT ) and Intel (INTC ).
The latest batch of economic data triggered worries about higher interest rates in the months to come. The consumer price index for February rose 0.2%, meeting expectations. The core CPI, which excludes food and energy, rose 0.3%, a bit higher than expected. Weekly jobless claims fell 12,000 to 371,000, a bigger drop than expected.
The report on leading economic indicators was unchanged at 112.4, showing that the economy is still recovering, says S&P MMS. But the Philadelphia Fed index, a key gauge of manufacturing activity in the Northeast, fell to 11.4 from 16.0. The index was expected to be flat.
Among stocks in the news Thursday, Dow component GE fell after influential bond fund manager Bill Gross of PIMCO criticized the conglomerate's growing short-term debt and questioned its long-term historical 15% annual EPS growth rates. In his monthly commentary to investors, Gross cited GE Capital selling $11 billion in medium-term and long-term debt last week, and then disclosing on Monday that it filed with the SEC to sell another $50 billion in bonds. Gross says his funds would not buy any GE commercial paper in the foreseeable future.
S&P analyst Robert Friedman says he strongly agrees with Gross's contention that GE's earnings growth chiefly is powered by a myriad of acquisitions funded by richly valued stock or cheap commercial paper. He also agrees with Gross' seeming contention that the game eventually will end. S&P continues to project GE will grow EPS at 9% at best, not at the consensus 15%.
Lending some support to the Dow late in the day was Philip Morris (MO ), which rose on news that it won a federal jury verdict in a case brought by the family of a Rhode Island smoker.
Protein Design Labs (PDLI ) was notably higher after Morgan Stanley upgraded the stock to overweight from underweight. The company had announced after the close Wednesday that it does not plan additional development of Zenapax as a therapy for psoriasis after a phase II study did not prolong the time of recurrence.
While many big-name tech stocks rose, there were a few losers. Apple Computer (AAPL ) fell after it raised prices on its new iMac computers by $100 because of increasing prices for parts such as memory chips. JP Morgan cut its estimates for the computer maker. And Lehman Brothers reduced estimates for AOL Time Warner (AOL ), sending the stock lower.
Companies expected to report earnings after the market close Thursday included Micron Technology (MU ), Palm (PALM ), and Nike (NKE ). Solectron (SLR ) reported weaker-than-expected second quarter results and warned that it sees a loss instead of earnings in the third quarter.
U.S. Treasuries ended higher in price after a lower-than-expected reading on the the Philadelphia Fed index. The higher close was also driven by short-covering, says S&P MMS.
Stronger-than-expected reports on core CPI and jobless claims, along with a flat reading on leading economic indicators, had added to concern that the Fed may raise interest rates at its May 7 meeting. S&P MMS doubts the Fed will tighten rates as soon as May, but it does expect it to adopt a tightening bias.
European stock markets were lower. In London, the Financial Times-Stock Exchange 100 index ended with a loss of 13.60 points, or 0.26%, to 5,253.30, despite news that U.K. February retail sales rose 1.5%, more than expected. In France, the CAC 40 lost 23.90 points, or 0.52%, to 4,579.90. In Germany, the DAX Index fell 17.57 points, or 0.33%, to 5,347.13.
In Asia, the markets ended lower. In Japan, the markets are closed for Vernal Equinox Day. In Hong Kong, the Hang Seng fell 206.87 points, or 1.87%, to close at 10,829.73.