Stocks Finish Lower

The markets showed little reaction to mild economic data, as higher crude oil futures weighed on sentiment. Volume was low on the second-to-last trading day of the year

Stocks finished lower Thursday after drifting through most of the session, showing little reaction to mild economic data. Trading was light in its second-to-last day of 2005, with airline stocks among the few strong performers as the transportation arena lured bargain hunters, says Standard & Poor's MarketScope.

The Dow Jones industrial average fell 11.44 points to 10,784.82. The broader Standard & Poor's 500 index dipped 3.75 points to 1,254.42. The tech-heavy Nasdaq composite index was down 10.78 points to 2,218.16.

"U.S. blue chips [are] finishing 2005 with a whimper as performance competition for hedge funds' 'hot' dollars has favored many diversions," says Roger Volz, chief technical analyst at New York-based Swiss American Securities, a subsidiary of Credit Suisse (CSR ).

Higher crude oil futures weighed on investor sentiment, says S&P MarketScope. February West Texas Intermediate crude oil was up 47 cents to $60.29 after a Department of Energy report showed inventories rose 100,000 barrels in the week ended Dec. 23. Natural gas futures fell despite lower inventories.

In economic news, the Labor Department said U.S. jobless claims rebounded 3,000 to 322,000 in the week ended Dec. 24, from a revised 319,000. The four-week moving average was 325,000, from 324,750. The markets should take the higher-than-expected figures in stride, awaiting home sales, says Action Economics.

U.S. existing home sales fell 1.7% to a 6.97 million unit rate in November, following a 2.7% decline in October to 7.09 million, the National Association of Realtors said. The pace was slightly slower than expected.

Also on the economic front, the Chicago-PMI manufacturing index for December dipped to a stronger-than-expected 61.5 in December from 61.7 in November. New orders rose to 66.7 from 61.6. The employment statistic was 51.7 from 50.3. The data could offset the softer existing home sales figures, says Action Economics.

Airlines were a bright spot Thursday, aided by a report from Raymond James (RJF ) predicting opportunities over the next several months for SkyWest (SKYW ), Republic Airways Holdings (RJET ) and Mesa Air Group (MESA ) to add substantial incremental business. Raymond James upgraded Republic and Mesa to outperform and reiterated its outperform rating on SkyWest.

Merger activity remained in focus, as Hilton Hotels (HLT ) agreed to a roughly $5.7 billion deal to acquire Hilton Group PLC, uniting the U.S. and global Hilton brands for the first time in more than 40 years.

Among other companies in the news, biotechnology outfits Alkermes (ALKS ) and Cephalon (CEPH ) received regulatory approval for Vivitrol, a treatment for alcohol dependence. Also in biotechnology, Novartis (NVS ) got regulatory approval of Femara, a drug for use after surgery in postmenopausal women with hormone-sensitive early breast cancer.

Circuit board manufacturer Multi-fineline Electronix (MFLX ) said it sees better-than-expected first-quarter net income of $15 million to $17.5 million. The company cites increased leveraging of fixed costs on what it expects to be exceptionally strong wireless communications sales.

In the health care equipment sector, Guidant (GDT ) was down as regulators issued their second update on the company's Prizm 2 and Contak Renewal defibrillator devices, noting that the devices may develop an internal short and fail. Separately, Quidel (QDEL ) obtained regulatory clearance for new, improved claims for its QuickVue Influenza A+B test, a 10-minute diagnostic test for influenza.

Restaurant chain Luby's (LUB ) rose after posting first-quarter earnings per share of eight cents, vs. a five-cent loss, on 6.9% higher total sales.

Horticultural product maker Scotts Miracle-Gro (SMG ) said it expects a first-quarter loss 15% to 20% greater than the $49 million loss over the same period in the current fiscal year, due to a continued shift in the timing of retailer purchases. The company said it sees adjusted net income in the 2006 fiscal year up 20% to 22% from 2005 levels.

Electronics manufacturer Sanyo Electric (SANYY ) was down after announcing a recall of heat exchange units for home heating and hot water supply systems due to possible parts defects.

European markets finished higher. In London, the Financial Times-Stock Exchange 100 index added 15.5 points to 5638.3. Germany's DAX index rose 11.43 points to 5458.58. In Paris, the CAC 40 index was up 16 points to 4772.93.

Asian markets ended mixed. Japan's Nikkei 225 index rallied 149.59 points to 16,344.2. In Hong Kong, the Hang Seng index fell 55.95 points to 15,045.59. Korea's KOSPI index climbed 11.21 points to 1379.37.

No major economic reports are due Friday. The new year gets a running start, however, with key data on the docket including the December employment report and the minutes to the Dec. 13 Federal Open Market Committee meeting, says Action Economics.

Treasury Market

Prices for 10-year Treasury notes nudged modestly higher to 101-02/32 with a yield of 4.36%, while 30-year bonds were up at 112-25/32 for a yield of 4.52%. Trading should thin out considerably Friday given the early close and empty data calendar, with some short-covering and year-end window-dressing expected, says Action Economics.

By Marc Hogan