Stocks Finish Mixed

Friday brings updates on consumer sentiment, the current account deficit, and more

Major stock indexes finished mixed Thursday as weakness in some of the first reports reflecting economic conditions after Katrina weighed on sentiment, says Standard & Poor's MarketScope.

The Dow Jones industrial average rose 13.85 points, or 0.13%, to 10,558.75. The broader Standard & Poor's 500 index was up 0.57 points, or 0.05%, to 1,227.73. The tech-heavy Nasdaq composite index lost 3.18 points, or 0.15%, to 2,146.15.

October West Texas Intermediate crude oil settled down 34 cents at $64.75 a barrel. Sellers emerged at mid-session, with price weakness led by gasoline futures, which were down over 7 cents a gallon at one point. Fund selling was a feature across the NYMEX complex, with a larger than expected EIA reported build in natural gas inventories the likely catalyst, reports Action Economics.

There are a few economic reports coming Friday. The preliminary reading for University of Michigan's September Consumer Sentiment is expected to drop to 86.4 from the August reading of 89.1 and July's reading of 96.5. "Hurricane Katrina is expected to take a heavy toll on sentiment, both from negative news stories and the related surge in gasoline prices," says Action Economics.

The second-quarter current account deficit is expected at $194.5 billion from the first quarter's $195.1 billion level. As a percentage of nominal GDP, the gap is expected at 6.3% compared to first quarter's record 6.4%.

In economic news Thursday, the Philadelphia Fed's business index plunged to 2.2 in September from 17.4 in August, while an inflation gauge in the report surged. This report, with a 71,000 surge in first-time jobless claims, is among the first to reflect economic conditions after Katrina, notes Standard & Poor's MarketScope.

The August consumer price index rose 0.5%, while the core rate, which excludes volatile food and energy prices, was up 0.1%, just under the 0.2% expected, after respective gains of 0.5% and 0.1% in July. Year-over-year, overall CPI accelerated to a 3.6% growth rate, from 3.2% the month before on high energy prices. Core prices held at a relatively tame 2.1% pace.

The index continues to show mild inflation outside of energy prices, and the August report should support sentiment that inflation is contained, calming nerves ahead of the Sept. 20 FOMC meeting, according to Standard & Poor's.

Another report released Thursday morning showed U.S. business inventories falling 0.5% in July after a flat reading in June and under the 0.1% expected. Sales climbed 1.1% after an upwardly revised 0.8% increase in June (previously +0.7%). The inventory to sales ratio fell to a new record low of 1.26 from 1.28 in June. Overall, inventories remain tight, to support GDP growth in the second half of 2005 as inventory restocking should provide a boost to growth, according to Standard & Poor's economists.

Along with the lower Philly Fed reading, the New York Fed's Empire State manufacturing index slowed to 17.0 in September, from 23.0 in August, about as expected. Employment rose to 12.9 from 10.2, while new orders fell to 13.1 from 33.8. Prices paid surged to 53.4 from 29.0, suggesting inflation pressures. Moreover, the six-month outlook dropped to 39.3 from 53.3, with prices jumping to 75.0 from 47.0.

Among companies in the news Thursday, Delta Air Lines (DAL ) and Northwest Airlines (NWAC ) filed for Chapter 11 bankruptcy protection on Wednesday evening. The threat of bankrupcty has become more dire as Katrina disrupted flights and sent jet-fuel prices soaring, the newspaper says.

Time Warner (TWX ) is in advanced discussions to sell a stake in America Online to Microsoft (MSFT ), according to the New York Post.

Motorola (MOT ) has hired J.P. Morgan to pursue a possible sale of its 5,000-employee automotive-products unit, a deal that could be valued at as much as $2 billion, according to The Wall Street Journal.

Google (GOOG ) priced its stock offering of 14.2 million shares at $295 per share.

Treasury Market

Treasuries yields vaulted higher on Thursday, a move sparked by curve steepening pressures and the bond market got its first good look at post-Katrina September data and didn't like what it saw, says Action Economics. The yield on the 10-year note rose to 4.228%.

The surge and near doubling of "prices paid" components in both the September Empire State and Philly Fed indices was sufficiently alarming to cause the long-end to underperform sharply, says Action Economics. This overshadowed the benign 0.1% gain on core CPI in August.

World Markets

European stock markets finished mixed on Thursday. London's Financial Times-Stock Exchange 100 index was up 36.1 points, or 0.68%, to 5,383.5.

Germany's DAX index fell 5.19 points, or 0.11%, to 4,905.98. In Paris, the CAC 40 index rose 8.96 points, or 0.2%, to 4,479.39.

Asian markets finished mixed on Thursday.

Japan's Nikkei 225 index jumped 152.53 points, or 1.19%, to 12,986.78, a new four-year high, amid optimism about economic growth. Along with strong demand locally, foreign buying interest has firmed on back of reform-minded Prime Minister Koizumi's election win Sunday and signs of improvement in Japan's economy, says Standard & Poor's MarketScope.

In Hong Kong, the Hang Seng index fell 45.6 points, or 0.3%, to 15,041.02 as losses on Wall Street and a jump in crude oil above $65 a barrel hurt sentiment. Many expect cautious trading in Hong Kong until the Sep. 20 FOMC meeting in the U.S. Federal Reserve monetary policy tends to influence rates in Hong Kong.

Before it's here, it's on the Bloomberg Terminal.