Stocks reversed earlier losses in a late-day rally Friday, finishing with small gains. Investors brushed aside less-than-stellar updates on retail sales and consumer confidence.
The Dow Jones industrial average finished up 11.80 points, or 0.12%, at 9,471.50. The broader Standard & Poor's 500 index added 2.21 points, or 0.22%, to finish at 1,018.63. The tech-heavy Nasdaq composite index ended 8.95 points higher, or 0.48%, at 1,855.04. Contributing to the lift in the S&P 500 were techs & financials.
"I think this is just position squaring," says Bryan Piskorowski, market analyst at Wachovia Securities, of the late-day rally. Otherwise, it "has been largely a digestive kind of week."
Two widely followed economic releases delivered some disappointing news Friday morning. The University of Michigan's consumer sentiment index came in much weaker than expected at 88.2 in the preliminary September report, down from 89.3 in August.
The weakness was in both the Present Conditions index, which fell to 98.8 from 99.7, and in the Expectations component, which dipped to 81.3 from 82.5. "The unexpected declines in the confidence measures will add to the rally in Treasuries and could keep pressure on equities and the dollar," says economic research outfit MMS International.
Earlier, a report on August retail sales showed a gain of 0.6%, half the increase analysts expected. Excluding auto sales, the number was a gain of 0.7%. "The overall figure is not nearly as strong as expected," says MMS International. S&P's Advisor Insight adds: "The data prompt questions about economic recovery sustainability, and the effects of the Bush tax cut."
The producer price index, a measure of wholesale inflation, rose 0.4% in August. The core PPI index, which excludes food and energy prices, showed an increase of 0.1%. Energy prices rose 1.2% on the back of a 6.3% gain in gasoline prices. "Outside of the temporary gain in energy prices, wholesale prices were generally benign," says MMS.
In earnings news, Oracle (ORCL ) posted first-quarter earnings of 8 cents per share, vs. 6 cents, on a 2.2% rise in revenues. The company notes that its new software license sales were down 7%, while its software license updates and product support increased 14%. The stock lost 3.2%.
Alcan (AL ) shares finished 11% higher on news that Pechiney has accepted the company's third buyout offer. S&P reiterates its accumulate rating.
Silicon Valley Bancshrs (SIVB ) raised its guidance for third quarter earnings to as much as 49 cents, from an upper range of 31 cents. The company also says that it has settled all of its remaining entertainment-lending litigation, and sees a 13 cents impact on its third-quarter earnings. The stock has gained 10%.
Merrill Lynch reportedly upgraded its rating on Qualcomm (QCOM ) to buy from neutral. Qualcomm shares ended the day 4.4% higher.
Dutch airline KLM (KLM ) gained 6% on reports that it's in very advanced talks with Air France on forming a business alliance.
Semitool (SMTL ) announced that it will take a non-cash charges in the fourth quarter related to inventory write-downs of $15 million to $17 million. The company widened its anticipated fourth-quarter loss to as much as 47 cents, up from a loss range of 8 cents to 11 cents. Semitool shares shed 8.5%.
In telecommunications, Intervoice (INTV ) raised its second-quarter forecast to $40.5 million to $42.5 million, saying these increased revenues, coupled with continued cost management, is expected to have a positive impact on its income from operations. The stock gained 8.7%.
Actel (ACTL ) says its third-quarter revenue growth will be in the mid single-digit range. Actel shares lost 1.3%.
Covest Bancshares (COVB ) agreed to be acquired by First Midwest Bancorp (FMBI ) in a $102.5 million deal. The terms include $27.45 cash for each Covest share. The stock gained 2.1%.
Next week, the economic calendar is active, "but potential market-moving data is relatively sparse" says MMS. Traders will watch for industrial production, business inventories and current account data, and the consumer price index. The FOCM will comment on Tuesday, but many expect the Fed to maintain a neutral stance.
Treasury prices surged to their best levels since late July in light of the weaker-than-expected September consumer confidence reading, and a disappointing read on U.S. retail sales. "Late profit-taking caused the Treasuries to give back about half of their morning gains, but the market retains a friendly bias heading into next week," reports MMS.
The dollar saw some give-back this week, although sentiment regarding the currency remains improved over the bearish outlook that was widespread a few months ago, according to a Standard & Poor's economic bulletin.
European stock markets finished lower -- falling 2% in Germany -- after the sour reports on consumer confidence, and August retail sales in the U.S. London's Financial Times-Stock Exchange 100 index gave up most of its earlier gains, and was lower by 4.4 points, or 0.10%, to 4,237.80. In Paris, the CAC 40 moved 25.69 points lower, or 0.77%, to close at 3,322.56. French July industial production fell, and July trade surplus rose, says MMS.
Germany's DAX index fell 74.62 points, or 2.09%, to end at 3,492.23.
Asian markets finished higher on Friday. In Japan, the Nikkei 225 index added 166.48 points, or 1.58%, to close at 10,712.81. In Hong Kong, the market was closed for trading on Friday.