Stocks Barely Budge

A slow trading session ended a relatively quiet month on Wall Street. Tech stocks got a lift from Dell's better than expected profit report

Major U.S. stock indexes ended essentially flat Friday amid slow trading in the final session of the month. The market had a mixed reaction to reports on consumer spending, consumer sentiment, and personal income.

Some technology stocks got a lift from better than expected earnings from Dell (DELL). Shares of American International Group (AIG) gained on an analyst upgrade.

On Friday, the blue-chip Dow Jones industrial average fell 7.9 points, or 0.06%, to 12,638.32. The broader S&P 500 index added 2.12 points, or 0.15%, to 1,400.38. The tech-heavy Nasdaq composite index was higher by 14.34 points, or 0.57%, at 2,522.66.

On the New York Stock Exchange, 17 stocks moved higher for every 13 in negative territory. On the Nasdaq, the ratio was 15 to 13 positive.

The slow trading session capped a relatively quiet month for stocks. Major indexes rapidly fell from October to March, and then rebounded strongly in April. In May, however, the S&P 500 was up just 1.05%, and the Dow dropped 1.42%. The Nasdaq had a better month, posting a 4.55% gain.

Brian Gendreau, investment strategist at ING Investment Management says there was little news in May to sway investors' sense that they face a "dual economy," with areas like housing and financials in recession while technology and healthcare continue to prosper.

On Friday, economists learned that consumer spending rose 0.2% in April, matching the rise in personal income. The increases were both in line with consensus estimates. The report includes revised estimates of income and spending for the last year. The saving rate held at an upward-revised 0.7%, compared with t he 0.2% estimated a month ago for March. The rise in consumer spending came in spite of a 0.5% drop in durable spending, reflecting weak car sales.

S&P chief economist David Wyss says the data are "consistent with sluggish gains in the second quarter GDP data."

The University of Michigan reported Friday that consumer sentiment rose to 59.8 in May from a preliminary estimate of 59.5, but remains down from 62.6 in April. The number was slightly better than the market consensus of 59.0. The May reading remains a 28-year low. Both the estimate of current conditions and the expectations components were down to 73.3 from 77.0 and to 51.1 from 53.3, respectively. Inflation expectations rose to 5.2%, a 20-year high.

The report shows "an ugly stagflationary mix with sentiment at its worst level since 1980 and medium-term inflation expectations rising to a 13-year high," wrote Bear Stearns economist John Ryding in a note Friday.

The U.S. Chicago purchasing managers' index (PMI) edged up to 49.1 in May from 48.3 and slightly better than the 48.5 expected. However, the index remains below the 50 neutral reading, indicating it is in contractionary territory. The employment component rebounded to 41.2 after plunging almost 10 points to 35.3 in April. New orders rose to 56.1 from 53.0. Prices paid jumped to 87.5 from 82.9 previously, to limit further gains on Treasuries.

The PMI report was "decent" and "in line with other [second quarter] data seen so far that suggests resiliency in the U.S. economy," said Win Thin of Brown Brothers Harriman. "Indeed, at this rate, we may not see any contraction at all in GDP for Q2."

Federal Reserve Vice Chairman Donald Kohn said Wall Street firms should be subject to greater regulatory scrutiny if they wish to continue relying on the Federal Reserve to soothe the ongoing credit crisis. Kohn said financial markets remained "far from normal" despite the central bank's best efforts to stem a withering of liquidity that first began with rising defaults in the mortgage sector and housing-linked bonds. He said Wall Street firms that have been able to obtain safe sources of funding from the Fed during the credit crisis are likely to face closer scrutiny.

July West Texas Intermediate crude oil futures, which plunged $4.17 per barrel on Thursday, moved 73 cents higher to $127.35 on Friday. U.S.

retail gas prices, meanwhile, reached a new record: The national average price for a gallon of gasoline hit $3.962 on Friday.

In June, Wall Street will be looking for signs that federal stimulus checks or recent interest rate cuts are spurring the economy, Gendreau says. Next week's busy economic calendar includes: the May ISM manufacturing survey and April construction spending report on Monday; Tuesday's reports on April factory orders and domestic vehicle sales; final first quarter productivity figures and the ISM non-manufacturing survey on Wednesday; and Thursday's May chain store sale report and the weekly jobless claims report. On Friday, the May employment report will give crucial insight into the labor market.

Among Friday's stocks in the news, Dell posted first-quarter earnings per share of 38 cents, vs. 34 cents one year earlier, on a 9% revenue rise. The technology concern says results were driven by better-than-industry growth of commercial and consumer products and services, and lower operating expense as a percent of revenue.

According to a Wall Street Journal report, Harris Corp. (HRS) began fielding expressions of interest from potential buyers this week, with preliminary bids for the electronics and defense company arriving in the low $70-per-share range, or about $10 billion, according to people familiar with the matter. The article noted that the preliminary bids were less than the $75-$80-per-share range the company's board hopes to fetch, the people said.

Tiffany & Co. (TIF) posted first-quarter earnings per share of 50 cents, vs. 39 cents one year earlier, on a 3% same-store sales rise and an 8% total sales rise (on a constant exchange rate basis). The luxury retailer sees worldwide net sales growth of about 10% in 2008 and now sees EPS of $2.80-$2.90.

Reuters reports that United Airlines, the operating unit of UAL Corp. (UAUA), and US Airways Group (LCC) have suspended merger talks due to concerns about labor opposition and integration costs, while United draws closer to an alliance with Continental Airlines (CAL), a source close to the talks said late on Thursday.

Major European stock indexes were mixed Friday. In London, the FTSE 100 index declined 0.24% to 6,053.50. In Paris, the CAC 40 index advanced 0.77% to 5,014.28. Germany's DAX index climbed 0.59% to 7,096.79.

Major Asian indexes finished higher. Japan's Nikkei 225 index added 1.52% to 14,338.54. In Hong Kong, the Hang Seng index was higher by 0.61% at 24,533.12.

Treasury market

Treasury prices were higher Friday, rebounding from a plunge in prices the previous day. The 10-year note was up 07/32 at 98-20/32 for a yield of 4.05%, while the 30-year bond rose 15/32 at 94-18/32 for a yield of 4.72%.

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