Stocks Finish Mixed

Traders on Friday were cautious ahead of next week's presidential election

Stocks finished mixed on Friday, after see-sawing around the unchanged level for much of the session. Traders weighed a mix of new economic data, including a disappointing initial third-quarter read of U.S. economic growth, and prospects for an unclear outcome in next week's U.S. presidential election.

The Dow Jones industrial average added 22.93 points, or 0.23%, to finish at 10,027.47. The broader Standard & Poor's 500 index moved 2.76 points higher, or 0.24%, to 1,130.20. The Nasdaq composite index lost 0.75 point, to end at 1,974.99. Auto stocks were among the worst performers, while health care and financial stocks were underperforming.

Volume was moderate on Friday, partly due to traders taking pause as they await results from the uncertain presidential election Tuesday. But Michael Farr, president & chief investment officer at investment firm Farr, Miller & Washington, notes that traders have really been watching the action from the sidelines since January. "This market has been range-bound... in a remarkable way," he says. "I hope the election will trigger the break from that range." And if the presidential election produces a "nice and tidy" result on Wednesday, he says "we'll have a great week."

The advance reading for third-quarter gross domestic product (GDP) showed the U.S. economy to be growing at a 3.7% annualized clip, less than the 4.3% analysts had predicted. (Second-quarter GDP recorded a 3.3% gain.)

The GDP figure was boosted by a strong rise in consumer spending, up 4.6% vs. a 1.6% increase in the second quarter, while the price index only lifted by 1.3% -- despite the higher cost of energy. "The data ... will contribute to the feeling [that] the Federal Reserve can slow its pace of rate hikes, without much risk," notes economic research firm, Informa Global Markets.

Later in the session, a pair of economic reports delivered more positive news. The final Michigan consumer sentiment index number improved to 91.7 for the second half of the survey, vs. the first half's reading of 87.5, which marked an 18-month low. The headline index was 94.2 in September.

The Chicago purchasing managers index (PMI), which gives a regional read of manufacturing activity, arrived stronger than expected at 68.5, up from 59. The orders index was 79.4, vs. a prior read of 69.7.

Oil prices were somewhat higher Friday. December crude rose to $51.76, which is still well below its Monday high of $55.67. Oil prices raced lower following Wednesday's better-than-expected inventory data from the Department of Energy and the American Petroleum Institute, and as China raised its benchmark one-year lending rate Thursday, a move that has affected many commodity prices.

"Some [traders were] encouraged that crude closed above the $51 level," notes S&P's MarketScope. "They think the recent slide was an interrruption, not the end of a strong rally based on perceived shortages and increased demand from China."

In company news Friday, Bristol-Myers Squibb (BMY ) reported third-quarter earnings per share (EPS) of 38 cents, on a 1% rise in sales. The pharmaceutical company didn't adjust its 2004 EPS guidance. Shares fell 2.4%.

Meanwhile, another big energy concern reported a surge in profits amid near-record oil prices. ChevronTexaco (CVX ) reported third quarter EPS of $1.51, vs. $1.01 one year earlier. Shares finished higher.

Gateway (GTW ) rose 8.7% after posting a third quarter loss of 16 cents per share, vs. a loss of 43 cents (GAAP basis) on $915 million in revenue. Gateway expects its fourth quarter EPS to be breakeven to 1 cent (GAAP) on revenue as high as $1.025 billion.

Tech consulting firm Sapient (SAPE ) posted third-quarter EPS of 6 cents, vs. 1 cent, on a 44% rise in service revenue. Shares were 13% lower.

Avon Products (AVP ) finished 8.5% lower after posting third-quarter EPS of 37 cents, vs. 28 cents, on an 11% revenue rise. The beauty-products company forecasts 3% lower fourth quarter sales in the U.S. due to a weaker consumer environment. Both S&P and Deutsche Bank have downgraded the shares.

Archer-Daniels-Midland (ADM ) added 8.8% higher after posting first-quarter EPS of 41 cents, vs. 23 cents on a 13% revenue rise. S&P reiterated its hold rating of the stock.

DoubleClick (DCLK ) posted third-quarter EPS of 12 cents, vs. 4 cents (GAAP), on an 8.2% rise in revenue. DoubleClick expects its fourth quarter EPS to arrive between one penny and 4 cents (GAAP) on revenue as high as $77 million. CIBC World downgraded the stock to sector underperform. CIBC World downgraded DoubleClick to sector underperform, while S&P reiterated its hold rating. Shares fell 8%.

Insurance brokerage Aon (AOC ) posted third-quarter EPS of 36 cents, vs. 45 cents from continuing operations, despite a slight revenue rise. The company withdrew its previous 2004 EPS from continuing operations guidance of $2.20 due to lower-than-expected revenue growth. S&P kept its avoid rating, and shares dipped 4.6%.

Elsewhere in corporate news, pharmaceutical giant Merck (MRK ) received an "approvable" letter from the U.S. Food and Drug Administration for a new drug application of its painkiller, Arcoxia, though additional safety data are required. Shares ended somewhat lower.

Traders have plenty of economic news to digest next week. On Monday, investors will get a read of personal income for September, and construction spending. On Wednesday, while traders will be hoping for a definitive result from Tuesday's presidential election, they will also eye reports on U.S. factory orders and factory inventories. Initial jobless claims arrive on Thursday, followed by a read of October's unemployment rate on Friday.

Next week's earnings calendar includes updates from the likes of Tyco International (TYC ), Tenet Healthcare (THC ), Duke Energy (DUK ), Qualcomm (QCOM ) and Berkshire Hathaway (BRK.A ).

Treasury Market

Treasury prices finished higher Friday. The mixed economic data balanced out and bonds were left to find their own month-end level, notes Action Economics. Also weighing was fear of a terrorist attack before or on Election Day. The 10-year yield finished at 4.03%.

The dollar continued to lose value vs. major currencies during the week. The euro was worth $1.279 on Friday afternoon, the British pound sterling was at $1.837 and the dollar was at a seven month low vs. the Japanese yen, around 105.84.

World Markets

European stock markets finished the week mixed. London's Financial Times-Stock Exchange 100 index shed 18.6 points, or 0.4%, to end at 4,624.20.

Germany's DAX index gained a mere 0.66 point, or 0.02%, to finish at 3,960.25. Deutsche Bank was lower after reporting that its third quarter revenues fell 2%.

France's CAC-40 index lost 15 points, or 0.4%, to 3,706.82, despite new economic data showing a fall in French consumer confidence in October, and a drop in unemployment in September.

Asian markets finished lower. Japan's Nikkei average slipped 81.7 points, or 0.75%, to end at 10,771.42. Shares of steel-related companies took a beating after China's rate hike on Thursday, and soft macro data, notes Informa Global Markets.

In Hong Kong, the Hang Seng index eased by 58.49 points, or 0.45%, to end at 13,054.66.

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