US stocks down 206

US stocks posted their first noteworthy losses of 206 today as analyst downgrades of two Dow Jones industrials and rising oil prices prompted investors to take profits just one trading session after the major indexes reached new highs.

Analysts said Coca-Cola and JPMorgan Chase could face difficulties in 2006 as the economy slows and consumers limit their spending – both of which could have a much broader impact on stocks as the year goes on.

Oil prices initially rose, deepening stocks’ losses, but ultimately lost ground and settled at US$63.94 (€53.12), unchanged from the previous session, on the New York Mercantile Exchange. The volatility was prompted by the breakdown of talks with Iran over its restarted nuclear research program.

Yet despite the losses and lingering uncertainties, analysts said Wall Street’s January rally would probably continue.

“You’re seeing some selling now, some consolidation maybe, but I’d be cautious of that. The market’s been very resilient,” said Brian Williamson, equity trader at The Boston Company Asset Management. “Investors have been very quick to buy if they get a little good news.”

The Dow Jones industrial average fell 81.08, or 0.73%, to 10,962.36.

Broader stock indicators also dropped. The Standard & Poor’s 500 index lost 8.12, or 0.63%, to close at 1,286.06, and the Nasdaq composite index was down 14.67, or 0.63% to 2,316.69.

Bonds climbed on news of the narrowing trade gap, with the yield on the 10-year Treasury note falling to 4.41% from 4.45% late on Wednesday. The dollar fell against most major currencies, while gold prices rose.

A slight rise in unemployment claims, fewer than Wall Street had expected, failed to encourage investors. The Labour Department said new claims for unemployment benefits rose by 17,000 last week to 309,000, lower than the 24,000 gain economists expected.

With the economic data still strong and corporate profits still expected to remain strong as fourth-quarter earnings season begins in earnest next week, analysts saw the day’s losses as an isolated occurrence, rather than a halt to the January rally.

“I think it’s relatively healthy. Nothing goes straight up. We know that. There needs to be a little consolidation before you can go higher,” said Joseph Keating, chief investment officer at First American Asset Management. “Between the situation in Iran and the Dow downgrades, it’s probably been a nice little excuse to take a few profits.”

The downgrades of Coca-Cola and JPMorgan Chase weighed on the Dow. Coca-Cola dropped 23 cents to 41.44 after Goldman Sachs lowered its rating on the beverage maker to “in-line” from “outperform” on the belief that 2006 would not be a breakout year for the company.

And Piper Jaffray cut JPMorgan Chase to “market perform” from “outperform,” saying the financial services company could see business slow down in the coming year, especially in stock trading and consumer loans. JPMorgan Chase slid 75 cents to 39.95.

Guidant fell 4 cents to 70.40 after Dow industrial Johnson & Johnson sweetened its bid for the medical device maker to US$23.2bn (€19.27bn). However, the bid, which was endorsed by Guidant’s board, remains lower than the US$25bn (€20.77bn) offer from rival Boston Scientific. Johnson Johnson lost 29 cents to 62.21, while Boston Scientific, which said it plans to continue pursuing Guidant, slipped 36 cents to 25.05.

Dow component The Home Depot is the subject of an informal probe by the Securities and Exchange Commission, according to The New York Post. The newspaper said regulators are looking at allegedly inflated payments collected from suppliers to cover the cost of damaged merchandise. Home Depot dropped 40 cents to 42.55.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume totalled 1.71bn shares, compared with 1.75bn traded on Wednesday.

The Russell 2000 index of smaller companies fell 4.40, or 0.62%, to 706.79.