A tumultuous quarter for the stock market ended with a whimper Friday. Major stock indexes posted modest losses as Wall Street interpreted several new clues to the state of the economy. Much of the data was better than expected as investors track the continuing effects of a credit crunch, a housing slump and a possibly weaker job market.
But while the data were encouraging, they also called into question the likelihood of interest rate cuts at the Oct. 30-31 Federal Reserve policy meeting. Indeed, St. Louis Fed President William Poole warned on Friday that markets should not "bake into the cake" more interest rate cuts.
On Friday, the Dow Jones industrial average was off 17.31 points, or 0.12%, to 13,895.63. The broader S&P 500 index fell 4.63 points, or 0.3%, to 1,526.75. The tech-heavy Nasdaq composite index was off 8.09 points, or 0.3%, to 2,701.5.
Nasdaq losses capped were capped by a 34% surge in shares of 3Com (COMS), which received a $2.2 billion takeover bid from private equity buyers.
According to Standard & Poor's Marketscope, trading was slow Friday, with stocks being pushed down by end-of-the-quarter window dressing and profit taking. For every 18 stocks down on the NYSE, 15 were up. The ratio was 18 to 12 negative on the Nasdaq.
Looking ahead to next week, the big event on the data calendar is the release of the September employment report on Friday, Oct. 5. Weak numbers from the August report were believed to have contributed to the Fed's decision to cut rates by a half-point on Sept. 18. Other releases include September ISM and vehicle sales (Monday), pending home sales (Tuesday); the September ISM nonmanufacturing index, the ADP employment report, Challenger job layoffs, and the weekly MBA mortgage data (Wednesday); Monster.com employment index, jobless claims, and factory goods (Thursday).
A report released Friday showed consumer spending rose 0.6% in August, better than the market had expected. U.S. personal income rose 0.3%. "Today's data sharply outperformed the August employment and retail sales reports, and bode well for the September outlook," says Action Economics. Inflation data also pleased economists: The PCE deflator, a price gauge closely watched by inflation hawks, edged down 0.1%; the core PCE deflator, excluding food and energy, was up 0.1%.
U.S. consumer sentiment held steady in September, according to the final reading from the Reuters/University of Michigan index, which was revised slightly lower from a preliminary report. "Consumer quickly tempered their reactions to the crisis in financial markets and a fear-induced free-fall in confidence was avoided," Richard Curtin, the survey's director, said in a statement. The index was at 83.4 in both September and August.
Construction spending rose 0.2% in August after declining 0.5% in July. On a year-over-year basis, construction spending is down 1.7%. While residential construction spending plunged 16% from last year, nonresidential construction is up 14.7%.
Finally, the Chicago purchasing managers' index hit 54.2 in September, better than the reading of 53 economists were expecting. The number is up from 53.8 in August and compared to a six-month average of 56.
After moving higher Thursday and early Friday, crude oil prices shifted lower. November West Texas Intermediate crude oil fell $1.22 to $81.66 per barrel.
Among stocks in the news on Friday, Accenture (ACN) reported earnings of 50 cents in the fourth quarter, down from 56 cents a year ago when a tax benefit boosted earnings. Higher expenses offset a 27% rise in revenue.
3Com will be sold for $2.2 billion to Bain Capital Partners. Huawei Technologies, a Chinese firm, will take a minority stake. The deal offers shareholder $5.30 per share, a 44% premium over Thursday's closing price.
RealNetworks Inc. (RNWK) plans to buy Game Trust, a small casual game firm based in New York, for an undisclosed price.
Cintas Corp. (CTAS) reported earnings of 51 cents, vs. 53 cents a year ago. Revenue rose 6%. Also, Cintas says it bought Certo Information Management, a Dutch document shredding and storage company, for undisclosed terms.
Wesco International (WCC) set a $400 million stock buyback program.
European indexes moved mostly lower Thursday. In London, the FTSE 100 index was off 0.3% to 6,466.80. Germany's DAX index edged up 0.1% to 7,861.51. In Paris, the CAC 40 index was down 0.31% to 5,715.69.
Asian indexes were mixed overnight. Japan's Nikkei 225 index fell 0.28% to 16,785.69. Hong Kong's Hang Seng index was up 0.29% to 27,142.47. On mainland China, the volatile Shanghai composite jumped 2.64% to 5,552.30.
Treasuries finished little changed Friday, as
early strength evaporated in the afternoon after the St. Louis Fed's Poole indicated further rate cuts were not a sure thing. Intraday volatility may also have reflected portfolio adjustments at the end of the quarter.
The 10-year note edged down 01/32 in price to 101-14/32 for a yield of 4.57%. The 30-year bond firmed 03/32 to 102-25/32 for a yield of 4.82%.