Stocks Close Mixed

The major indexes all finished with losses for January. Geopolitical developments could overshadow economic and corporate news next week

Stocks finished mixed Friday, with the major indexes closing out January with losses for the month. A surprisingly upbeat report on the manufacturing sector sparked gains in blue-chip stocks, amid some mixed corporate earnings results, negative guidance from some companies, and continued worries about a U.S.-Iraq conflict. Technology shares were hurt by a bleak outlook from Applied Materials (AMAT ).

The Dow Jones industrial average finished up 108.68 points, or 1.37%, to 8,053.81. The broader Standard & Poor's 500-stock index gained 11.09 points, or 1.31%, to 885.7. But the tech-laden Nasdaq composite index fell 1.44 points, or 0.11%, to 1,320.91.

A losing January, in Wall Street lore, foretells a down year to come for the stock market. But that's not necessarily so, according to S&P MarketScope. "Over the past 43 years, the S&P 500 has registered a down January 15 times [and] the down Januarys have correctly predicted declines for the rest of the year seven times," notes MarketScope. "As an indicator of down years, the month of January has only been correct 46.6% of the time, less than a coin toss."

Still, good omens came in signs of increased business spending and short-covering before the weekend, says Sam Stovall, chief investment strategist at Standard and Poor's. "If people are willing to cover [short positions] over the weekend, it means they are more worried on the upside than the downside," Stovall says.

Friday brought a positive sign for manufacturing activity. The Chicago Purchasing Managers' index (PMI) unexpectedly jumped to 56.0 in January from 51.7 in December. The news boosted equity markets, and also gave a lift to the dollar.

In other economic news, the University of Michigan consumer sentiment index slipped to 82.4 in January from 86.7 in December. Before Friday's opening bell, the Commerce Dept. announced that consumer spending in December increased 0.9%, exceeding expectations and up from a revised 0.4% uptick in November. Personal income rose 0.4% in December, also higher than economists anticipated.

Next week provides still more economic data for investors to ponder. Monday brings updates on December construction spending, and more importantly, the Institute for Supply Management January report on manufacturing. According to economic-research group MMS International, market expectations see the index slipping marginally lower, but still holding over the 50% boom/bust level. On Tuesday, December factory orders are due. Thursday's release is fourth-quarter productivity data. On Friday, January employment data will be announced. MMS expects a 60,000 rise in non-farm payrolls.

However, economic news could take a back seat to politics. On Feb. 5, Secretary of State Colin Powell is expected to present evidence to the U.N. Security Council that Iraqi dictator Saddam Hussein possesses weapons of mass destruction. On Friday, President Bush met with U.K. Prime Minister Tony Blair to discuss strategy regarding Iraq.

The Powell presentation "is going to be very important," says Stovall. "But people are still going to look at the economy, especially if we get numbers that make us feel better about [the year's] outlook."

On Friday, semiconductor equipment maker Applied Materials (AMAT ) warned that first quarter orders would slip 35%, worse than an originally anticipated 20% decline. The news dragged on tech shares, and Applied Materials stock fell 7.5%.

A busy earnings-report season wrapped up Friday with mixed news. Dow component Disney (DIS ) beat expectations, posting results after Thursday's close; fast-food chain Wendy's (WEN ) and manufacturer Honeywell (HON ) posted on-target earnings per share results on Friday; while energy trader Dynegy (DYN ) and oil company ChevronTexaco (CVX ) failed to meet Wall Street's earnings expectations in announcements Friday.

Also on Friday, UAL (UAL ), the bankrupt corporate parent of United Airlines, posted losses of $1.5 billion for the fourth quarter and $3.2 billion for 2002.

Treasury Market

Prices of U.S. Treasuries stayed mostly lower Friday. Only the 30-year note rose in price, as Treasuries were pressured by the better-than-expected Chicago PMI and positive personal income and spending figures.

World Markets

European markets finished trading mixed. London's FTSE index was down 11.3 points, or 0.32%, to 3,567.4. In Paris, the CAC-40 index increased 23.75 points, or 0.81%, to 2,933.88. In Frankfurt, the DAX index was up 54.05 points, or 2.01%, to 2,747.83.

In Asia, stocks finished higher. Japan's Nikkei 225 index gained 23.13 points, or 0.28%, to 8,339.94. In Hong Kong, markets were closed Friday. On Thursday, the benchmark Hang Seng index increased 18.16 points, or 0.2%, to 9,258.95.