Stocks closed mixed Friday as late-day buying amid the expiration of options lifted the S&P 500 index but failed to bring the broader market into positive territory. Earlier in the day, major indexes drifted at lower levels as some lackluster reports on the Empire State index, University of Michigan consumer sentiment survey, and import prices failed to generate much buying interest ahead of the extended holiday weekend.
On Friday, the Dow Jones industrial average fell 28.77 points, or 0.23%, to end the session at 12,348.21. The broader S&P 500 index added 1.13 points, or 0.08%, to close at 1,349.99. The tech-heavy Nasdaq composite index fell 0.46%, or 10.74 points, to finish at 2,321.80.
Activity in the broader market was negative. On the New York Stock Exchange, 17 shares declined in price for every 14 that advanced. Breadth on the Nasdaq was 19-10 negative.
U.S. financial markets will be closed Monday, Feb. 18, for the Presidents’ Day holiday.
The University of Michigan U.S. consumer sentiment index fell to 69.6 in mid-February from 78.4 in January, coming in well below the 77 that markets had expected. The
current conditions index fell to 85.4 from 94.4, while the expectations index fell to 59.4 from 68.1.
Bear Stearns economist John Ryding believes the "plunge in consumer sentiment in
early February has a recessionary feel about it, although more objective economic data still appear consistent with slow growth rather than outright recession”.
“Judging by this report and the January nonmanufacturing ISM report, both consumer and business sentiment are very weak. However, it remains to be seen if this is a result of developments in the economy or a reflection of the very negative media coverage of financial market turmoil," Ryding wrote in a note Friday.
S&P economist Beth Ann Bovino thinks the "disappointing report adds further weight to the likelihood of a pullback in consumer spending."
The U.S. Empire State index plunged to -11.72, a 21% drop from last month's reading for the sentiment gauge. The number only applies to one region of the country, but the magnitude of the drop, which exceeded most expectations, caught traders' attention.
In other economic news, U.S. industrial production met expectations by rising 0.1% in January after a 0.1% increase in December.
Also, U.S. import prices rose 1.7% in January and export prices rose 1.2%. The gain for import prices could add to inflation fears.
Traders will be looking ahead to reports on inflation and the housing market next week. According to a report compiled by Action Economics, the January consumer price index, scheduled for release Wednesday, is expected to increase 0.2% on a core basis and 2.4% year-over-year. A 5.4% rebound in January housing starts to a 1.055 million unit annual level is predicted based on better weather and favorable comparisons to the 14.2% plunge in December. Initial jobless claims, set for Thursday, are seen steady at 348,000.
Also on the docket for Thursday: The Philadelphia Fed’s index or regional manufacturing conditions may improve to -11.5 in February, while January leading indicators are forecast at -0.1%.
In the energy market Friday, March WTI crude oil futures, which rose to a $96.60 per barrel high in the morning, gained 4 cents to $95.50 on late short covering ahead of the three-day holiday weekend.
Among stocks in the news Friday, Countrywide Financial (CFC) reported daily mortgage loan application activity rose in January, to $2.6 billion from $1.5 billion in December. The mortgage giant's loan pipeline was $51 billion at the end of January, compared to $35 billion for December.
Priceline.com (PCLN) posted earnings of 68 cents per share, vs. 33 cents a year ago, as revenue rose 29%.
Chipotle Mexican Grill (CMG) reported lower-than-expected earnings of 53 cents per share, vs. 33 cents a year ago. Same-store sales rose 11% and revenue jumped 32%. The restaurant chain expects a percentage increase in same-store sales in the low- to mid-single digits in 2008, with 130 to 140 new restaurants opening up.
Best Buy (BBY) lower its 2008 profit guidance by 5 cents, to a range of $3.10 to $3.20. It expects same-store sales to grow 2.5% to 3%, not the 4% previously predicted.
Illinois Tool Works (ITW) reported revenues rose 16% for the quarter ending Jan. 31. The firm expects revenue growth of 8% to 11% next quarter.
European stocks finsihed lower on Friday. In London, the FTSE 100 index was down 1.56% to 5,787.60, and in Paris, the CAC 40 index dropped 1.79% to 4,771.79. Germany's DAX index fell 1.87% to 6,832.43.
In Japan, the Nikkei 225 index edged 0.03% lower to 13,622.56, while in Hong Kong, the Hang Seng index rose 0.53% to 24,148.43.
Treasuries rallied Friday on short covering ahead of the weekend, following a week of losses. An unexpected drop in the February Empire State index contributed to the bearish backdrop for bonds, as did losses in equities. The 10-year note rose 16/32 in price to 97-29/32 for a yield of 3.75%. The 30-year bond climbed 37/32 to 96-24/32 for a yield of 4.58%.