Rally hopes remain for US stocks
Surging oil prices and a weak dollar prompted a spate of profit-taking today, pushing stocks slightly lower in light holiday-week trading.
However, the minimal losses gave investors hope that Wall Street’s year-end rally would still extend into January.
Crude oil futures moved higher after the Energy Department’s latest weekly petroleum inventory report showed a fall in the nation’s crude reserves, while reports of explosions in the Saudi Arabian capital of Riyadh prompted a sharp rise on top of that.
A barrel of light crude settled at 43.64, up 1.87, on the New York Mercantile Exchange.
The dollar fell to its fifth straight record low against the euro – good news in the short term for American exporters and tourism, but problematic for inflation should the dollar fail to gain ground in the long term.
“I think you’re definitely seeing some money being moved off the table today,” said Steve Neimeth, senior vice-president and portfolio manager at AIG SunAmerica.
“But the economic data we’ve seen over the past month has been positive, and there’s a lot of reasons to stay optimistic,” he said.
The Dow Jones industrial average fell 25.35, or 0.2 %, to 10,829.19.
Broader stock indicators were fractionally lower. The Standard & Poor’s 500 index was down 0.09, or 0.01 %, at 1,213.45, and the Nasdaq composite index lost 0.19, or 0.01 %, to 2,177.00.
All three major indexes reached 3 1/2-year highs yesterday as Wall Street extended its “Santa Claus” rally.
However, with many investors on the sidelines during the holidays, speculative traders could swing the markets in any direction, and analysts said it would be difficult to determine any short-term trends for Wall Street until next week.
Wall Street received some good news from the National Association of Realtors, which said sales of existing homes totalled 6.94 million units in November, up from 6.76 million in October and far surpassing economists’ expectations of 6.75 million homes.
The figures made up for a disappointing report on new home construction last week, which fell far short of expectations.
“The housing numbers were nice, but again, that was for November. We had a very cold December, and that could weigh on housing once we get into next month,” said Bryan Piskorowski, market analyst at Wachovia Securities.
“And trading is very thin this week because we’re between holidays, so you can’t read anything into it.”
In corporate news, Time Warner Inc. fell 13 cents to 19.42 after the Wall Street Journal reported the company was in talks with Sprint Corp. to offer a Time Warner-branded cellular service on a trial basis in 2005. Sprint edged 5 cents higher to 24.88 on the news.
Oracle Corp. said it now has shareholder control over PeopleSoft Corp., with 75 % of the latter company’s outstanding shares now tendered to Oracle, which has also assumed control of PeopleSoft’s board. Oracle’s takeover is expected to close in January.
Oracle slipped 12 cents to 13.72, while PeopleSoft gained 8 cents to 26.48.
Proxim Corp. tumbled 84 cents, or 17.1 %, to 4.10 after the wireless networking equipment maker lowered its fourth-quarter profit forecasts. Proxim blamed a slowdown in wireless carrier purchasing as well as pricing pressure from rival Cisco Systems Inc.
Biotech company Genzyme Corp. said the US Food and Drug Administration had given its approval to the company’s leukaemia drug Clolar, which is aimed at treating children in whom previous leukaemia treatments have failed. Genzyme rose 63 cents to US$58.16 (€42.75).
Advancing issues outnumbered decliners by about five to four on the New York Stock Exchange, where volume came to 925.92 million shares, compared with 983.02 million yesterday.
The Russell 2000 index of smaller companies was down 1.23, or 0.2 %, at 653.34.
