Stocks End with Small Gains

Lower oil prices boosted sentiment, but a surprise interest rate hike by China capped gains

Major indexes finished a bit higher Friday, as lower oil prices cheered investors, but a surprise interest rate hike by China, and a greater-than-expected jump in U.S. initial jobless claims dampened sentiment.

The Dow Jones industrial average finished 2.51 points higher, or 0.03%, at 10,004.54. The broader Standard & Poor's 500 index gained 2.04 points, or 0.18%, to 1,127.44. The Nasdaq composite index added 5.75 points, or 0.29%, to end at 1,975.74, with earlier losses moderated by strength in chip, Internet, and electronic equipment groups. Elsewhere, airline, technology, financial, and retail groups lead the gainers.

The week's major economic release -- the advance reading for third-quarter gross domestic product -- arrives ahead of Friday's session. Economists expect GDP growth for the quarter to come in at 4.3%. Economic research firm, Informa Global Markets expects that GDP will have risen faster than personal consumption for six straight quarters, and that "inflation will be very tame."

Big names in the earnings calendar Friday include Bristol-Myers Squibb (BMY ) and ChevronTexaco (CVX ).

For the first time in nine years, China raised its benchmark one-year lending rate by 27 basis points to 5.58% Thursday. The surprise move raises concerns of slowing demand for raw materials out of the manufacturing giant. The timing of China's rate hike was unexpected, but not the possibility, due to rising inflation, notes Informa Global Markets. The move impacted basic materials stocks, which weighed heavily on the indexes.

Oil prices continued to move lower Thursday. December NYMEX crude fell to $50.92 -- an 8.8% drop since Monday's record high of $55.67. Oil prices have raced lower since Wednesday's better-than-expected inventory data from the Department of Energy and the American Petroleum Institute. "Charts show that the market might have topped... [but] contrarians said crude was due for pullback as some pundits called for $60 to $100 prices," notes S&P's MarketScope. Meantime, December natural gas futures settled lower, at $8.68.

In economic news Thursday, a read of initial jobless claims showed that 20,000 more Americans -- 350,000 -- reported being out of work in the week ended Oct. 23, somewhat higher than was anticipated. The four-week moving average fell to 343,250 from 348,750 in the prior week. The insured unemployment rate, a measure of the work force receiving unemployment benefits, was unchanged at 2.2%.

In company news, two major oil companies reported quarterly results Thursday. Royal Dutch Petroleum (RD ) moved higher after posting a third quarter EPS of $1.60 vs. 72 cents. The company kept its 2004 production outlook, and its 2004 to 2006 gross divestment proceeds, but cut its 2004 capital investment expectation to around $14 billion. The boards of Royal Dutch and its sister company, Shell Transport & Trading (SC ) have proposed unification of the companies under the name Royal Dutch Shell.

ExxonMobil (XOM ) reported third quarter EPS of 88 cents after a special charge, vs. 55 cents. Excluding the special charge, EPS were 96 cents --representing the oil giant's highest quarter ever. Despite the positive news, shares ended somewhat lower.

Delta Air Lines (DAL ) rose 16% higher after coming to a tentative agreement with the pilots union to change wages, pensions and other benefits -- a $1 billion annual savings to the company -- in order to avoid a bankruptcy filing. Bear Stearns upped its rating of Delta to peer perform, while S&P kept its avoid rating.

Akamai Technologies (AKAM ) posted third-quarter EPS of 8 cents, vs. a loss of 3 cents (GAAP basis) on 28% higher revenues. The current EPS fell below some estimates. Shares fell 11%.

One of the Nasdaq's biggest laggards was JDS Uniphase (JDSU ), which shed about 11% after posting a first quarter loss of 2 cents, vs. a loss of 2 cents, despite a 32% revenue rise. The company sees its second quarter revenue down 8% to flat. Roth Capital downgraded the shares to neutral, while S&P kept its hold rating.

Giving a boost to personal products stocks, Gillette (G ) reported third-quarter EPS of 47 cents, up from 41 cents in the same quarter of 2003, on a 12% rise in sales. S&P reiterated its hold rating. Gillette shares gained 5.2%.

Amid a slew of earnings comes the initial public offering of the company behind animated movies such as Shrek. DreamWorks Animation (DWA ) shares were initially priced at $28 by underwriters, but quickly gained 38%.

Treasury Market

Treasury prices finished higher Thursday, after a choppy session, as a dip in oil prices, higher stocks, and China's interest rate hike weighed.

The dollar resumed its move lower vs. major currencies Thursday. The euro was worth $1.274, the British pound sterling was at $1.829 and the dollar was at 106.25 yen.

World Markets

European stock markets finished higher on Thursday. London's Financial Times-Stock Exchange 100 index added 12.7 points, or 0.27%, to 4,642.80. The U.K's Nationwide house price index showed that house prices fell for the first time in three months, while U.K. consumer confidence rose for first time in that period.

Germany's DAX index gained 30.56 points, or 0.78%, to 3,959.59. Volkswagen was higher following that it may cut up to 15,000 jobs at its main factory in Wolfsburg, Germany, if it doesn't reach an agreement with workers to cut costs, reports S&P's MarketScope.

France's CAC-40 index added 43.43 points, or 1.18%, to end at 3,721.82.

Asian markets finished higher on Thursday, on the back of falling oil prices and strong earnings reports. Japan's Nikkei average gained 161.17 points, or 1.51%, to end at 10,853.12. Sony gaining nearly 1% ahead of its earnings release.

In Hong Kong, the Hang Seng index added 274.44 points, or 2.14%, to end at 13,113.15.

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