Wall Street closed lower in profit-taking today after the previous session’s big gain, though the market held on reasonably well despite a surprising drop in consumer confidence and a disappointing forecast from Texas Instruments Inc.
The major indexes were down for much of the day, then recovered most of their losses in late trading. Still, the market’s given and take reflected the unknowns facing investors.
Wall Street remained gratified by the nomination of Bush administration economist Ben Bernanke to succeed Alan Greenspan as head of the Federal Reserve Board, but also continued to worry about inflation in the face of slow economic growth and warnings of declining fourth-quarter sales or profits from major companies like Texas Instruments.
Stocks were further pressured as the Conference Board reported that its consumer confidence index fell to 85 in October, down from 86.6 in September and less than the 88 reading economists had expected. The unexpected drop raised new concerns about consumer spending just a month before the start of the holiday shopping season.
“We’re in a market that is clearly in a little short-term decision box,” said Rod Smyth, chief investment strategist at Wachovia Securities. “It’s the debate whether core inflation remains low, which allows the Fed to stop raising rates, or whether core inflation is not able to be contained. We’ll get a progression of data and numbers that will help resolve this somewhat, but until then, we’re in the box.”
The Dow fell 7.13, or 0.07%, to 10,377.87, having lost more than 68 points earlier in the session. The Dow shot up 169 points on Monday.
Broader stock indicators were modestly lower. The Standard & Poor’s 500 index dropped 2.84, or 0.24%, to 1,196.54, and the Nasdaq composite index lost 6.38, or 0.3%, to 2,109.45.
Bonds added to Monday’s sharp losses, with the yield on the 10-year Treasury note rising 4.51% from 4.45% late Monday. The dollar was lower against most major currencies, while gold prices rose.
Oil prices rebounded sharply after losing ground in the previous trading session, adding to investors’ worries. A barrel of light crude settled at US$62.44 (€51.56), up US$2.12 (€1.75), on the New York Mercantile Exchange.
In other economic news, existing home sales for September, reported by the National Association of Realtors, were steady at an annualized rate of 7.28m homes, slightly higher than expected. However, the increase was due to higher demand for new homes among refugees from Hurricane Katrina; without that demand, sales would have fallen.
While third-quarter earnings from Texas Instruments rose 12% from the year-ago quarter, the company’s revenue forecasts for the fourth quarter were weaker than expected. That led Bear Stearns analysts to downgrade the company’s stock. Texas Instruments dropped 2.37, or 7.7%, to 28.55.
“Obviously, with the Nasdaq leading losses, Texas Instruments’ problems are bleeding through to the rest of the tape,” said Brian Williamson, an equity trader at The Boston Company Asset Management. “It was just enough negativity to push us over the edge and fuel some of this profit-taking we’re seeing here.”
DuPont Co. gained 1.18 to 40.80 after one-time charges related to hurricane damage and taxes. Without those charges, the company’s earnings beat Wall Street forecasts by 3 cents per share.
Earnings at International Paper Co. rose sharply in the third quarter on proceeds from the sale of a New Zealand forest products company and a tax settlement. Despite materials and energy costs, the company surpassed analysts’ earnings expectations by 9 cents per share. International Paper nonetheless lost 37 cents to 28.
Cablevision Systems Corp. tumbled 3.54, or 13%, to 24.26 after the Dolan family, the company’s majority shareholders, withdrew a plan to take the cable operator private.
The family has recommended that Cablevision’s board issue a US$3bn (€2.48) special dividend to shareholders instead.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where volume came to 1.72bn shares, compared with 1.65bn traded on Monday.
The Russell 2000 index of smaller companies fell 3.87, or 0.6%, to 642.73.