Stocks finished Thursday's slow-moving session mixed, following updates on initial jobless claims and durable goods, and a report on new home sales. The Nasdaq gained about 0.5% on a chip-stock rebound.
The Dow Jones industrial average finished down 21.48 points, or 0.20%, to 10,580.14. The broader Standard & Poor's 500-stock index added 1.24 points, or 0.11% to 1,144.91. The tech-heavy Nasdaq composite index gained 9.59 points, or 0.47%, to 2,032.97. Aerospace and defense and wireless services stocks finished lower. Housing, oil drilling and computer storage stocks made gains.
Equities could be entering a transition phase marked by a shift in leadership away from cyclical sectors -- and by a more gradual pace for equity market appreciation, said Francois Trahan, managing director and chief investment strategist at Bear Stearns, in a research note issued Thursday. "Economic conditions would actually have to improve from here for stocks to accelerate further."
Joe Liro, equity strategist at Stone & McCarthy Research Associates, says that "more than anything else, the market is in a long consolidation phase that began four or five weeks ago. We're taking a long time to digest the big rally from the fall and early winter."
In economic news Thursday, new home sales dipped 1.7% in January to a 1.106 million annual pace, vs. an upwardly revised 1.125 million in December. "Housing sector data are generally pulling away from the extreme highs of the late summer and autumn, so the decline in new home sales in neither a surprise nor a disappointment," says economic research firm Informa.
Initial jobless claims rose 6,000 for the week ending Feb. 21, to 350,000. Last week, the reading was 344,000. The four-week moving average rose to 354,750. Continuing claims fell by 62,000 to 3.102 million, after a downward revised 83,000 rise the prior week. "A number of 350,000 was in line with consensus and consistent with an improving job market," notes S&P MarketScope, "but the four-week moving average of 354,750 up from 352,000 was disturbing."
The report on January durable goods orders sent a mixed message. Headline orders declined 1.8% -- the median estimate was for a 1.5% rise -- vs. December's 1.6% rise. Without transportation orders, which fell 10.4%, durable goods orders rose 2%. Non-defense and non-aircraft capital goods orders rose 3.6%. Shipments were flat, and inventories barely higher. "The decline in the durable goods headline orders index masks an otherwise very healthy report, which shows good evidence of continued demand for capital equipment," says Informa.
In corporate news, biotech stocks enjoyed a late-day bounce after Genentech (DNA ) got approval from the U.S. Food and Drug Administration for its colon cancer drug, Avastin, to be used with chemotherapy. Genentech added 7.2%.
Coffee-house chain Starbucks (SBUX ) finished 4% lower after posting 13% higher February same-store sales and 32% higher total sales. The company says that its current high level of sales growth is not sustainable, and that about 20% sales growth, and 3% to 7% same-store sales growth is the right level for long-term expectations. S&P has kept its avoid rating of the stock.
Restaurant operator Darden Restaurants (DRI ), which runs chains such as Red Lobster and Olive Garden, raised its third quarter earnings per share guidance to an upward range of 46 cents. The company cites stronger-than-expected sales, and profitability in January and February. Darden now sees EPS growth between 12% and 15% for fiscal 2004. Prudential reportedly upgraded the stock to overweight from neutral. Darden added 5.7% Thursday.
Walt Disney (DIS ) moved higher despite the California Public Employees' Retirement System (Calpers) decision on Wednesday to withhold voting for Michael Eisner as chairman and CEO.
According to news reports, Microsoft's (MSFT ) Tokyo headquarters got a visit from Japan's Fair Trade Commission, which is checking into the company's licensing practices with computer manufacturers in Japan. The shares finished somewhat lower.
Video-game designer Midway Games (MWY ) moved 3.3% lower after posting a fourth quarter loss of 52 cents per share, vs. a loss of 54 cents, despite a 62% revenue decline. The company expects its 2004 net loss to be about $20 million on revenue of about $140 million. The company has filed a $100 million universal shelf registration statement.
Department store operator J.C. Penney (JCP ) posted fourth quarter earnings of 83 cents, vs. 58 cents from continued operations. The company sees its first quarter earnings as high as 12 cents per share, and anticipates a much better consumer environment this year. Shares moved up 4%.
Elsewhere in retailing, American Eagle Outfitters (AEOS ) posted fourth quarter earnings of 57 cents, vs. 54 cents on 5.2% higher total sales. The company says that its consolidated February month-to-date comparable store sales have increased in the mid-teens. American Eagle shares were mostly unchanged. Shares finished higher.
This week's earnings calendar wraps up on Friday with Introgen Therapeutics (INGN ).
The week's economics news slate concludes with Friday's preliminary gross domestic product figures for the fourth quarter of 2003. Early GDP data are expected to show the economy grew 4.1%, vs. 4.0% in previous estimates.
The producer price data for January -- originally due on Jan. 19 -- won't be released until next week at the earliest.
Treasuries finished somewhat lower on Thursday, as the stronger U.S. dollar took center stage. "An uptick in jobless claims, softer headline durable [goods orders], and a bit of a pullback in new home sales went unnoticed," says Informa. "Prices rebounded off the lows by noon, but day traders capitulated later in the session."
Further greenback strength "came on the heels of the call by French prime minister Jean Pierre Raffarin and German chancellor Gerhard Schroeder's calls for an ECB rate cut," says Informa. Schroeder is heading to Washington to discuss the weak dollar issue with U.S. President George Bush.
Among the major currencies, the euro was trading at $1.243, the pound sterling was at $1.861, and the dollar was at 109.60 yen.
European stock markets managed to finish with small gains on Thursday. London's Financial Times-Stock Exchange 100 index ended 7.1 points higher, or 0.16%, to 4,514.60, as J.P. Morgan Chase improved its recommendations for the oil industry, and shares of Shell Transport (SC ) and BP (BP ) rose. "Traders are still a bit restrained by reports that British Consumer Confidence fell after the recent Bank of England rate hike, and February factory orders fell," reports MarketScope.
In Paris, the CAC 40 added 11.86 points, or 0.32%, to 3,714.49, as Prime Minister Raffarin urged the European Central Bank to cut interest rates to bolster the economy, and cool off a strong euro that's stifling exports. A survey shows that French manufacturing confidence rose to a 33-month high in February.
Germany's DAX index gained 12.47 points, or 0.31%, to 4,007.81, amid comments from Chancellor Schroeder that a further rise in the euro could cause the economy to stall. Shares of Metro AG were higher after Morgan Stanley raised its rating on the stock to overweight from equal weight.
Asian markets finished higher on Thursday. In Japan, the Nikkei 225 index gained 156.56 points points, or 1.47%, to 10,815.29. Strength in the U.S. dollar fueled gains in the Nikkei, reports S&P's MarketScope, especially among Japanese exporters.
In Hong Kong, the Hang Seng index added 75.17 points, or 0.55%, to 13,674.64.