Stocks Finish Lower

The major indexes struggled as investors puzzle over whether the Fed will continue hiking rates

Stocks retreated on Thursday, partly reflecting uncertainty about the Federal Reserve's policy course in the wake of the Katrina disaster, says Standard & Poor's MarketScope.

The Dow Jones industrial average fell 37.57 points, or 0.35%, to 10,595.93. The broader Standard & Poor's 500 index was down 4.69 points, or 0.38%, to 1,231.67. The tech-heavy Nasdaq composite index fell 6 points, or 0.28%, to 2,166.03.

Stocks groups that led the market's recent advance were weaker, including retailers and homebuilders. Semiconductors gained, helping support the Nasdaq, as investors awaited Intel's (INTC ) mid-quarter update after the market close. The chip giant said it expects revenue for the third quarter to be between $9.8 billion and $10 billion, as compared to the previous range of $9.6 billion to $10.2 billion.

In the energy markets Thursday, October West Texas Intermediate crude oil prices ended down 12 cents to $64.49 a barrel, after dropping sharply to near $63 following a less than expected oil and related weekly stock decline in the U.S. despite Hurricane Katrina. Crude stocks fell by 6.4 billion (well below the Reuters median forecast for a 8.1 million decline), gasoline stocks fell 4.3 million barrels (median had been for 6.2 million), and distillates stocks fell by 800,000 (median was for a 3 million draw), says Action Economics.

Friday's release of August import prices is expected to surge 1.1%, while export prices may be flat. The big story on the month will be another huge jump in petroleum, with risk that the petro aggregate could increase upwards of 10%, says Action Economics. Export prices, however, will likely be held back by pre-hurricane weakness in agricultural prices, says Action Economics.

In economic news Thursday, U.S. jobless claims fell 1,000 to 319,000 in the week ended September 3, from 320k the week before, with no real impact from Katrina given most offices were likely closed. "The markets may not move much on these pre-Katrina data, and we'll look for claims to spike higher in coming weeks in the aftermath of the hurricane," says Action Economics.

U.S. wholesale sales rose 0.5% in July while inventories dipped 0.1%. June sales were revised down to 0.5% from 0.6% initially; inventories were revised down to 0.4% from 0.7%. The data won't have much impact on the markets but will help economists refine GDP figures, says Action Economics.

Among stocks on the move, Texas Instruments (TXN ) raised the high end of its forecasted range for the current quarter, citing broad-based demand, according to news reports. The chip maker now sees revenue of $3.48 billion to $3.62 billion and earnings per share of 36 cents to 38 cents in the third quarter, including 3 cents per share to cover the cost of expensing stock options. The shares were up in after-hours trading.

Coca-Cola Enterprises (CCE ) shares fell after the bottler says third-quarter European volume is below expectations. It sees third-quarter EPS below the 51 cents consensus estimate, and 2005 EPS in the low to mid-$1.30s, excluding any impact from Hurricane Katrina.

Sears Holdings (SHLD ) shares dropped after the retailer posted 98 cents second-quarter EPS on flat Kmart same-store sales and 7.4% lower Sears domestic same-store sales. The company named Aylwin Lewis CEO and president.

Hovnanian Enterprises (HOV ) shares fell after the company reported disappointing results. Third-quarter EPS came in at $1.76, vs. $1.33, on a 24% rise in revenue. The home builder sees fiscal year 2005 (October) EPS of $7.00 and fiscal year 2006 EPS of $8.05-$8.40.

Take-Two Interactive (TTWO ) posted 41 cents third-quarter loss per sh are, vs. 21 cents loss a year ago, despite a 6% sales rise. It sees lower-than-expected 85-90 cents fiscal year 2005 EPS on sales of $1.22 billion to $1.27 billion. The shares lost ground.

UST (UST ) lowered its top end of previously announced 2005 EPS guidance of $3.20-$3.30 to $3.20-$3.25 and third-quarter EPS to be slightly below prior year's level.

Treasury Market

After drifting lower overnight, yields continued to follow the ebb and flow of energy prices and rebounded as crude oil dipped back below $65 a barrel following smaller draws in EIA inventory statistics than expected, says Action Economics. In quiet trading conditions, debate continued to swirl over the likelihood of a Fed pause in September, says Action Economics. The benchmark 10-year yield settled at 4.12%.

World Markets

European stock markets finished mostly lower. London's Financial Times-Stock Exchange 100 index was off 25.1 points, or 0.47%, to 5,340.8 on profit taking as crude oil prices rise.

Germany's DAX index rose 4.61 points, or 0.09%, to 4,992.75. E.ON was lower after Merrill Lynch cut its recommendation to neutral from buy, saying E.ON's potential bid for Scottish Power may bring uncertainty in the months to come.

In Paris, the CAC 40 index lost 20.25 points, or 0.45%, to 4,465.94.

Asian markets finished mixed on Thursday.

Japan's Nikkei 225 index fell 73.7 points, or 0.58%, to 12,533.89 as investors took some money off the table ahead of Japan's general election on Sunday. July machinery orders fell.

In Hong Kong, the Hang Seng index rose 58.4 points, or 0.38%, to 15,166.17.

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