An all-time record US trade deficit and a surprising drop in consumer confidence sparked profit-taking on Wall Street today, sending stocks lower despite the week’s bullish economic news from the Federal Reserve.
The selloff was prompted by an unexpected 10-point dive in the University of Michigan’s mid-February consumer sentiment index. Economists had forecast a slight rise.
And before the session began, the Commerce Department reported a 17.1% increase in the trade deficit to 489.4 billion for 2003, far outstripping the previous record of 418 billion set in 2002.
While some investors found the latest data confusing given Fed chairman Alan Greenspan’s optimistic assessment of the economy, the falling prices were also due to the normal spate of investors cashing in profits before the long holiday weekend.
“The consumer confidence and the trade figure was not good news,” said Peter Cardillo, senior vice president and chief market analyst for SW Bach & Co. “But this doesn’t necessarily reverse the bullish sentiment in the market.”
The Dow Jones industrial average dropped 66.22, or 0.6%, to 10,627.85, but finished the week 0.3% higher thanks to Wednesday’s 123-point gain. It was the Dow’s second straight winning week.
Broader stock indicators also fell for the day. The Standard & Poor’s 500 index was down 6.30, or 0.6%, at 1,145.81, but managed a second straight weekly advance, rising 0.3%. The Nasdaq composite index fell 20.05, or 1%, to 2,053.56, falling 0.5% for its fourth straight down week.
Despite the trade deficit figure, which was far worse than Wall Street expected, there was good news in the Commerce Department report. US exports totalled 1 trillion, the best showing since 2000 and a 4.6% increase from 2002. That, combined with a generally good week of economic news, shored up prices.
Comcast Corp’s proposed 54 billion hostile takeover of The Walt Disney Co continued to intrigue investors as Disney promised to give the bid full due diligence. Comcast slipped 16 cents to 29.90, while Disney fell 1.08 to 26.92 after two days of strong gains. Microsoft, down 36 cents at 26.59, and Time Warner, down 19 cents at 17.24, have been mentioned as possible white knights for Disney.
Pharmaceutical company Cephalon’s earnings fell sharply from the same quarter last year, when it benefited from a large tax gain. Earnings were in line with analysts’ expectations, and Cephalon shot up 1.84 to 57.20.
Technology stocks were mixed on a pair of bellwether earnings reports. Dell jumped 98 cents to 34.55 after posting earnings that beat estimates by a penny per share and gave a stronger outlook on corporate technology spending. Video microchip maker nVidia fell 22 cents to 23.30 after it beat Wall Street expectations by 3 cents per share.
Declining issues outnumbered advancers by a 2-to-1 ratio on the New York Stock Exchange, where volume came to 1.31 billion shares, compared with 1.46 billion on Thursday.
The Russell 2000 index of smaller companies was down 7.61, or 1.3%, at 585.14.