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Stocks Close Mixed For Third Straight Day After Initial Drop - U.S. Commentary


After recovering from an early move to the downside, stocks turned in another lackluster performance over the course of the trading day on Thursday. The major averages eventually closed mixed for the third consecutive session.

While the major averages all closed near the unchanged line, the Dow posted a modest loss. The Dow edged down 9.52 points or 0.1 percent to 13,973.39, while the Nasdaq crept up 1.78 points or 0.1 percent to 3,198.66 and the S&P 500 inched up 1.05 points or 0.1 percent to 1,521.38.

The early weakness on Wall Street came as reports showing contractions in fourth quarter GDP in Germany, France, and Japan led to renewed concerns about the global economy.

The reports showed that German GDP fell by 0.6 percent in the fourth quarter, while French GDP dropped by 0.3 percent. Both decreases were slightly steeper than expected.

A separate report showed that Japanese GDP edged down by 0.1 percent in the fourth quarter compared to economist estimates for 0.1 percent growth.

Reflecting the potential impact of weakness overseas, auto giant General Motors (GM) cited losses in Europe as a reason for its weaker than expected fourth quarter earnings.

However, an upbeat jobs report from the U.S. helped to offset the negative sentiment, with the Labor Department report showing that first-time claims for U.S. unemployment benefits fell by much more than anticipated in the week ended February 9th.

The report said initial jobless claims fell to 341,000, a decrease of 27,000 from the previous week's revised figure of 368,000. Economists had expected jobless claims to edge down to 360,000 from the 366,000 originally reported for the previous week.

News on the merger-and-acquisition front also helped to limit the downside for the markets, with shares of Heinz (HNZ) moving sharply higher after the food products company agreed to be acquired by an investment consortium comprised of Berkshire Hathaway and 3G Capital.

Under the terms of the agreement, Heinz shareholders will receive $72.50 in cash for each share of common stock they own, resulting in a transaction valued at $28 billion including debt. The price represents a 20 percent premium to Heinz's closing price on Wednesday.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Oil service stocks saw considerable strength, however, with the Philadelphia Oil Service Index surging up by 3.1 percent. With the gain, the index reached its best closing level in almost a year.

Lufkin Industries (LUFK) and Halliburton (HAL) turned in two of the oil service sector's best performances, advancing by 6.7 percent and 6.1 percent, respectively.

Internet stocks also showed a strong move to the upside, with the NYSE Arca Internet Index rising 1.2 percent to a twelve-year closing high. ValueClick (VCLK) posted a standout gain after reporting better than expected fourth quarter results and providing upbeat guidance.

On the other hand, airline stocks came under pressure on the day, resulting in a 1.7 percent drop by the NYSE Arca Airline Index. US Airways (LCC) helped to lead the airline sector lower, falling by 4.6 percent despite finalizing a merger agreement with American Airlines parent AMR Corp.

Utilities and natural gas stocks also saw some weakness on the day, although selling pressure remained relatively subdued.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

Meanwhile, the major European markets moved to the downside on the day. While the German DAX Index dropped by 1.1 percent, the French CAC 40 Index slid by 0.8 percent, and the U.K.'s FTSE 100 Index fell by 0.5 percent.

In the bond market, treasuries moved higher following the Treasury Department's thirty-year bond auction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.9 basis points to 2.00 percent.

Looking Ahead

Economic data may attract some attention on Friday, with traders likely to keep an eye on reports on industrial production, consumer sentiment, and New York manufacturing activity.

On the earnings front, Agilent Technologies (A), Brocade (BRCD), CBS (CBS), and Goldcorp (GG) are among the companies releasing their quarterly results after the close of today's trading.

by RTTNews Staff Writer

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