U.S. stocks gain ground in final half-hour of trading
Tuesday September 14, 3:29 pm ET
By Mark Cotton
NEW YORK (CBS.MW) -- U.S. stocks moved higher heading in the final half-hour of trading Tuesday as a dividend hike by McDonald's tempered some of the concern over rising crude prices, weaker-than-expected August retail sales and the outlook for corporate earnings.
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The Dow Jones Industrial Average (^DJI - News) was last up 10 points at 10,324 after briefly surging to 10,340.13 after McDonald's announced its dividend increase.
Within the Dow, the fast food giant (NYSE:MCD - News) remained the biggest percentage gainer, up 1.9 percent after it raised its annual dividend by 15 cents, or 38 percent, to 55 cents a share. Prior to the announcement, the stock was down as much as 0.5 percent.
Elsewhere on the benchmark index, DuPont (NYSE:DD - News) was off 0.6 percent as the company's share price showed little reaction after it reaffirmed its 2004 earnings outlook.
Pfizer shares (NYSE:PFE - News) posted a modest gain of 0.7 percent after a panel of the U.S. Food and Drug Administration said that while antidepressant drugs may trigger suicidal behavior in a small percentage of children, they can also be effective in treating pediatric depression. Pfizer makes Zoloft, one of the leading treatments for depression.
The Nasdaq Composite Index (NasdaqSC:^IXIC - News) was up 3.37 points at 1,913.75, off an intraday high of 1,917.74. In the prior session, the tech-rich index closed above 1,900 for the first time since July 20.
The S&P 500 (CBOE:^SPX - News) was 2.77 points higher at 1,128.59, while the Russell 2000 index (CBOE:^RUT - News) of small-cap stocks was off 0.5 percent.
Market strategists said concern over corporate outlooks and rising oil prices was weighing on sentiment.
"We are in the pre-announcement confession season and it's been a little rougher than what we've seen in the past quarters, and it's enough to cause a pause in the market at these levels," said Peter Boockvar, equity strategist at Miller Tabak.
Office Depot, Kroger and LCI Logic were the latest companies to issue downbeat outlooks on future earnings and revenues.
Boockvar said a fresh rise in oil prices on supply concerns was another factor keeping the market in check.
Crude-oil futures continued to surge on concern over the threat to U.S. oil production facilities posed by Hurricane Ivan as it nears the Gulf of Mexico, with reports of sabotage on Iraqi export pipelines further lifting prices.
Turning back to the broader market for equities, decliners outpaced advancers by a 17-to-15 margin on the New York Stock Exchange, and by a 16-to-13 score on the Nasdaq.
Volume was 975 million shares on the Big Board and 1.24 billion shares on the Nasdaq.
By sector, drug stocks (AMEX:^DRG - News) , Internet companies (CBOE:^GIN - News) and energy groups (CBOE:^OIX - News) were all moving higher.
Brokerages (AMEX:^XBD - News) , semiconductors (Philadelphia:^SOXX - News) and biotechnology stocks (AMEX:^BTK - News) traded lower.
In other markets, the dollar eased against other currencies after the government reported a yawning current account deficit.
Gold futures closed near $408 an ounce as the greenback's weakness raised the attractiveness of the precious metal as an investment.
After trading lower for most of the session, bonds reversed course heading into the close higher.
Retail in focus
Retail stocks were in the spotlight after the latest data offered a mixed picture on consumer spending and as investors digested lackluster earnings outlooks from Office Depot and Kroger.
Retail sales in August fell a larger-than-expected 0.3 percent, marking the third decline in the past five months. Economists had been expecting a 0.1 percent drop.
Excluding autos, sales rose 0.2 percent, as expected.
"Retail sales were a little a bit of a disappointment," said Peter Cardillo, chief market analyst and strategist at S.W. Bach.
At the same time, the figures were not that much of a surprise, Cardillo added. At the beginning of September, a mixed bag of same-store sales figures from retailers had already given the market a foretaste of the government's August data.
Meanwhile, the retail sales index compiled the International Council of Shopping Centers and UBS showed an increase of 0.2 percent in same-store sales for the week ended Sept. 11 compared to the prior week.
ICSC characterized the increase as "moderate," reflecting Labor Day sales, back-to-school shopping and the lingering impact of a sales-tax holiday in New York state.
In other news for the sector, shares of Office Depot (NYSE:ODP - News) slumped as much as 7 percent after the office-supply retailer warned that third-quarter earnings would fall short of expectations due to lower-than-anticipated sales across all three of its business segments. The stock was last down 6.5 percent at $15.15.
Shares of supermarket giant Kroger (NYSE:KR - News) tumbled 4.6 percent after the company posted second-quarter results below analyst expectations, and warned that it would be a challenge to meet its same-store sales growth target of 1.3 percent for the full year.
On a more positive note shares of Pier 1 Imports (NYSE:PIR - News) rose 4.8 percent after the specialty home-furnishings retailer posted second-quarter earnings which topped analyst estimates by a penny.
Federated Department Stores (NYSE:FD - News) meanwhile said late Monday it is planning to change the name of all its regional department stores to the Macy's nameplate. Federated shares were last up 1 percent at $46.03.
Shares of Kmart Holding (NasdaqNM:KMRT - News) jumped $3.44, or 4 percent, to $88.78 after UBS raised its price target on the retailer to $101 from $85.
"We are more comfortable with the cash-flow generation after strong second-quarter results and no longer value the company simply on its assets," analyst Gary Balter told clients.
MGM, and more gloom for the chip sector
Metro-Goldwyn-Mayer (NYSE:MGM - News) extended a 4 percent gain from the prior session, with the studio's shares last up 14 cents at $11.69 after agreeing to be bought by a consortium led by Sony (NYSE:SNE - News) for $12 a share in cash, plus assumed debt, in a deal valued at about $4.8 billion.
Sony's shares dipped 0.6 percent to $35.59.
In the chip sector, LSI Logic (NYSE:LSI - News) became the latest company to lower its third-quarter outlook, prompting brokerage Wachovia Securities to downgrade the stock.
Over the last two weeks, Intel (NasdaqNM:INTC - News) , Texas Instruments (NYSE:TXN - News) and National Semiconductor (NYSE:NSM - News) all warned of slowing revenues.
Shares of LSI Logic were last down 9.3 percent to $4.76.
Also, Morgan Stanley said it was also lowering its 2005 revenue growth rate for the semiconductor industry as an inventory correction and slower economic growth have reduced near-term demand.
And in another blow for the sector, Bear Stearns reduced its capital-spending forecast for the semiconductor capital-equipment industry.
Broker action
Overnight, Merrill Lynch downgraded its ratings on defense stocks United Defense Industries (NYSE:UDI - News) and Rockwell Collins (NYSE:COL - News) to "neutral" from "buy," citing valuation.
On United Defense, Merrill told clients: "While demand for Bradley armored vehicles, armor track & upgrades could lead to earnings growth, naval ship and repair programs may be pressured in coming years."
Shares of United Defense traded last down 1.7 percent at $39.14, while Rockwell Collins shares trimmed early losses to trade down just 7 cents to $36.15.
Oil, currencies, gold, bonds
Crude-oil futures closed more than 1 percent higher in New York on supply concerns and fading hopes that OPEC would adopt a rise in oil-output quotas when cartel members meet Wednesday in Vienna.
Overnight, Saudi oil minister said his country is not in favor of raising OPEC's official production rate or the $22-to-$28 price band, AFX News reported.
Crude for October delivery ended up 52 cents at $44.39.
On foreign-exchange markets, the dollar edged lower after the Commerce Department reported the U.S. current account deficit widened to a record $166.2 billion in the second quarter from $147.2 billion in the first quarter.
Worries about the U.S.'s inability to draw enough foreign capital to finance its trade imbalance have hounded the dollar for nearly two years.
The euro was up 0.1 percent against the greenback at $1.2265. Against the Japanese yen, the dollar was off 0.6 percent at 109.40.
Gold for December delivery rose $1.50 to $407.50 after climbing as high as $409 an ounce intraday.
"Shorter term, gold as well as the euro are most likely anticipating additional weak economic reports for the rest of the week, which would bring more dollar selling," said Dale Doelling, chief market commentator at Bullion.com in Chicago.
U.S. Treasury prices regained some traction in afternoon trade, after trading lower on August retail sales much of the session.
The benchmark 10-year Treasury note ended the day up 2/32 at 100 3/32. Its yield (CBOE:^TNX - News) , which moves in reverse of price, stood at 4.13 percent.
