Stocks finished with solid gains Friday ahead of the Labor Day weekend. On Friday, the Dow Jones industrial average finished up 41.61 points, or 0.44%, to 9,415.82. The broader Standard & Poor's 500 index added 5.19 points, or 0.52%, to 1,008.03. The Nasdaq composite index increased 10.40 points, or 0.58%, to 1,810.58.
Though the session contained some noteworthy data releases, trading remained quiet ahead of the long weekend. For most of the session, a pre-holiday malaise limited impact from key reports on manufacturing conditions in the Midwest, consumer sentiment and personal income. A speech by Federal Reserve Chairman Alan Greenspan pressured Treasuries. First, investors got an update on July personal income, which rose 0.2%, while consumption increased 0.8%. Both figures were in line with expectations. The University of Michigan consumer sentiment index was revised down to 89.3 in August from the preliminary 90.2 (90.9 in July). The downward revision is a surprise, especially after the jump in the Conference Board's confidence measure, which climbed to 81.3 from 77.0. Expectations fell to 82.5 from the preliminary 83.6 (83.7 in July). Present conditions dropped to 99.7 from the preliminary 100.5 (102.1 in July). August Chicago-PMI, a regional manufacturing gauge, was better than expected, rising to 58.9. Economic research outfit MMS International expected a fall to 54.5 from 55.9.
Investors also weighed a speech by Fed chief Alan Greenspan at Jackson Hole, Wyo. He spoke to other Fed leaders on the subject of "Monetary Policy and Uncertainty." His tone belied a very deliberate rejection of recent criticism that the Fed use a more defined and perhaps simplistic set of tools (such as an inflation target) to set policy, says MMS.
Greenspan said he favored a "risk management" approach that takes note of the fallible various models of the economy, but makes a judgement on the increasingly complex risk of possible economic outcomes. He noted the Fed was inclined "toward policies that limit the risk of deflation though the baseline forecasts from most conventional models would not project such an event."
The summertime unofficially comes to an end, at least as far as financial markets are concerned, once traders return from Monday's Labor Day holiday. Market players will return to a heavy data calendar.
On Tuesday, the key ISM manufacturing report for August is due. MMS expects the index to rise to 53.0 from 51.9 in July. The Challenger Layoffs survey will also be of interest on Tuesday, given nagging concerns about the labor market.
Other data include construction spending on Wednesday, revised productivity, the ISM service sector survey and factory orders on Thursday. The Fed's Beige Book report on economic activity for the upcoming Sept. 16 FOMC meeting arrives on Wednesday.
But the marquee release of the week comes at the end: the August employment report, scheduled for Friday. MMS expects a modest decline in nonfarm payrolls of 35,000, though it expects the unemployment rate to tick higher to 6.3%. U.S. Treasury Secretary Snow's trip to Japan and China will also be closely watched by the markets. Company news has been light over the past week, but should pick up after the holiday. Treasury Market Treasuries finished a bit lower Friday, though they cut early losses prompted by the morning's data releases. Month-end indexers ruled the abbreivated session, which was marked by thin pre-holiday trading.
Fed Chairman Greenspan's speech on "Monetary Policy under Uncertainty" gave little away in terms of the policy trajectory. He did not address what the markets wanted to hear: the current state of policy and what the time frame might be for rate-hike action, says MMS. World Markets European markets finished down amid news of a 2.1% rise in the August consumer price index in the EMU, amid rising energy prices, and partly due to a bounce of travel related services prices linked to the late timing of German summer school holidays. Food prices in Italy and Germany failed to show any effect from predicted supply shortages from this year's heatwave. London's Financial Times-Stock Exchange 100 index lost 36.90 points, or 0.88%, at 4,161.10. In Paris, the CAC 40 ended off 11.53 points, or 0.35%, to 3,311.42. Germany's DAX index shed 2.00 points, or 0.06%, at 3,490.67, after the German Finance Minister confirmed a 2003 budget deficit target of 3.8%, up from 3.5% in 2002, while the public debt burden is to rise to 63% of GDP from 60.8% in 2002. Germany's July retail sales fell 1.6% month over month and 2.2% year over year, below market expectations. Asian markets finished higher. The Nikkei 225 index added 118.33 points, or 1.16%, to finish at 10,343.55, amid an unexpected increase in Japan's industrial output. In Hong Kong, the Hang Seng index gained 148.87 points, or 1.38%, to close at 10,908.99.