Stocks End the Week Lower

Investors will eye next week's updates on manufacturing and employment for further signs of economic recovery

Stocks finished lower Friday, amid disappointing earnings from Nike and some upbeat economic data. Volume was light in typical summertime Friday trading, notes Standard & Poor's MarketScope.

The Dow Jones industrial average fell 90 points, or 0.99%, to 8,989.05, pressured by weakness in International Paper (IP ). The broader Standard & Poor's 500 index edged down 9.6 points, or 0.97%, to 976.22. The tech-heavy Nasdaq composite index lost 8.73 points, or 0.53%, to 1,625.28.

Friday's declines comes after Thursday's strong gains as investors digested news of the Federal Reserve's decision to lower interest rates by a quarter percentage point to 1%, the lowest in 45 years, to stimulate economic growth. On Thursday, comments from the Fed's May policy meeting were released. The Fed said deflation was more of a remote possibility.

Next week, which is shortened by the July 4 holiday, the economic reports include Chicago PMI manufacturing data on Monday; the national ISM manufacturing survey and auto sales on Tuesday; and factory orders and June employment data on Thursday. ISM and factory orders are expected to rebound, while payrolls should remain damp, predicts economic research outfit MMS International.

On the earnings front, companies could begin issuing hints about how results look as the quarter concludes Monday. Among the few companies scheduled to release results are Constellation Brands (STZ ), Emmis Broadcasting (EMMS ), and Gucci Group (GUC ).

In economic news Friday, the University of Michigan sentiment index jumped to 89.7 in June from the preliminary 87.2 reading (it was 92.1 in May). That's much better than expected. Both components increased. Expectations were 86.4 from the preliminary 84.2 (91.4 in May), while present conditions increased to 94.7 from the preliminary 92.0 (93.2 in May).

U.S. personal income rose 0.3%, and spending increased 0.1% in May. The April data were also revised higher. Disposable personal income rose 0.3%. The data are consistent with expectations of decent second-quarter spending which should support better second-quarter growth relative to a disappointing first quarter, says economic research outfit MMS International. The data should not impact the market much, however, as more of the focus is on next week's figures, MMS says.

Among stocks on the move Friday, Nike (NKE ) shares fell after the company reported disappointing results after the closing bell on Thursday. Nike posted fourth-quarter earnings per share of 92 cents, vs. 77 cents, on an 11% revenue rise. The athletic shoe and apparel maker says worldwide future orders for goods scheduled for delivery between June and November were up 4.4%. Merrill reportedly downgraded the stock, while Lehman raised its price target.

Genentech (DNA ) got fast-track designation from the Food and Drug Administration for its Avastin drug for the treatment of previously-untreated first-line metastatic colorectal cancer patients.

Pharmaceutical shares were under some pressure as Merrill Lynch downgraded Eli Lilly (LLY ) to neutral, citing concerns about future growth prospects for the company's Zyprexa drug.

Treasury Market

Treasuries rounded out the week on a defensive footing Friday, sensing that the Federal Reserve was one step nearer the end of the easing cycle, and picking up no lift from the decline in equities, says MMS International. Still heavy with corporate (GM) and government (2-year) supply, prices along the entire curve buckled, though it also steepened as the front-end outperformed. With ISM and factory orders likely to rise early next week, the correction could extend until payrolls induces some position squaring, says MMS.

World Markets

European stock markets were mixed Friday. London's FTSE 100 index was up 26.1 points, or 0.65%, to 4,067.8, even though the government reported Britain's economy grew at the weakest pace in more than a decade in the first quarter as construction output fell and consumers curbed spending.

In Paris, the CAC-40 index edged up 5.56 points, or 0.18%, to 3,109.02. There was little reaction to reports French unemployment rose to a 3-year high in May, and first-quarter GDP rose 0.3%. In Frankfurt, the DAX index fell 16.56 points, or 0.51%, to 3,224.66, amid a report German consumer confidence rose in June.

Asian markets finished higher Friday. Japan's Nikkei 225 index gained 180.65 points, or 2.02%, to 9,104.06. Hong Kong's benchmark Hang Seng index rose 51.1 points, or 0.53%, to 9,657.21.

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