Stocks Finish Mixed to Close Out a Miserable Quarter

It seemed fitting that the period's last trading day brought news of more accounting woes -- this time at Xerox. Topping next week's docket: The June jobs report

After being higher most of the day, stocks lost steam in the last hour of trading Friday and ended mixed. Investors had focused mainly on positive economic data, brushing aside news that copier company Xerox (XRX ) plans to restate revenues by about $2 billion over five years. But some sellers emerged amid portfolio adjusting as the scandal-plagued second quarter came to a close.

The Dow Jones industrial average fell 26.70 points, or 0.29%, to 9,243.26. The tech-heavy Nasdaq composite index added 5.78 points, or 0.40%, to 1,464.98. And the broader Standard & Poor's 500-stock index lost 0.82 of a point, or 0.08%, to 989.82.

The dismal second quarter performance leaves the Nasdaq down about 25% for the year. The Dow has lost 7.8%, while the S&P 500 index has fallen 13.8% year-to-date.

Next week's economic calendar is light, considering the markets will be closed for the Independence Day holiday on Thursday. On Monday, the Institute for Supply Management (ISM) will release its manufacturing index, while construction spending and domestic car and light truck sales are also due.

On Friday, the June employment report will be released before the market opens. Most economists expect a gain of 75,000 jobs in June, while the unemployment rate is seen inching up to 5.9% from 5.8% in May. The stock market will close early, at 1:00 p.m. ET, on Friday.

There are very few earnings reports due next week, but investors should keep an eye out for confessions with the close of the second quarter.

On Friday, accounting worries took over the market once again. The announcement by Xerox that it improperly overstated revenue came just a day after the Securities and Exchange Commission charged WorldCom (WCOM ) with fraud after the embattled telecom company found nearly $4 billion in accounting inaccuracies earlier this week.

Meanwhile, the market was cheered somewhat by a report that U.S. consumers in June were more upbeat about the economy than expected. The final reading for the University of Michigan consumer sentiment index for June was 92.4, up from its preliminary 90.8 figure.

The sentiment number beat expectations, but was nevertheless lower than the 96.9 reading in May. Still, it was "better than expected given the erosion in equities was thought to have weighed on the data," Standard & Poor's economic research unit MMS says.

In other economic news, a regional measure of manufacturing activity came in lower than expected. The Chicago Purchasing Management Index dropped to 58.2 in June compared to 60.8 in May. However, any number above 50 is still expansionary.

And U.S. consumers cut their spending last month according to an economic report showing that U.S. consumption fell 0.1% in May after an upwardly revised 0.6% gain in April. Meanwhile, personal income rose 0.3% in May after a revised lower to a 0.2% gain in April. This report was generally in line with expectations.

Among stocks on the move, shoe and apparel retailer Nike (NKE ) posted fourth quarter profits that exceeded expectations on higher sales in the U.S.

On the currency front, the U.S. dollar was mixed after the Bank of Japan intervened Friday in the currency markets to try to weaken the yen.

Treasury Market

Treasuries ended lower in price as stocks were in positive territory most of the day.

Traders contacted by S&P MMS were encouraged by the decent price action in 2-year notes after the surprise announcement of an auction this morning. The ongoing safe-haven demand -- and the recent currency intervention by the Bank of Japan -- should provide good support for the notes.

World Markets

In London, the Financial Times-Stock Exchange 100 index was up 115.80 points, or 2.55%, to 4,656.40 in reaction to Wall Street's rally Thursday and a report that UK first quarter GDP rose 0.1%. But GDP growth for 2001 was revised down to 1.9% from 2.2%.

France's CAC 40 gained 155.21 points, or 4.15%, to 3,897.99 although the unemployment rate remained near its 18-month high in May. But the market was encouraged by news that May producer prices fell 0.3%.

Germany's DAX index was up 123.13 points, or 2.89%, to 4,382.56 amid a published report that June unemployment rate fell a bit. There was some reaction to a U.S. market rally yesterday.

Markets in Asia finished higher. In Japan, the Nikkei 225 index surged 360.24 points, or 3.51%, to end at 10,621.84 as Tokyo stocks gained momentum in the Friday afternoon session, led by exporter shares on better sentiment following an upward revision in first quarter GDP for the U.S. and a rebound in U.S. stocks overnight.

In Hong Kong, the benchmark Hang Seng index ended up 80.46 points, or 0.76%, at 10,598.55.

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