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msnbc.com
updated 11/9/2004 8:39:47 AM ET 2004-11-09T13:39:47

Wall Street closed Monday’s rather sluggish trading session barely changed, as investors paused for breath after a nine-session rally, even as crude oil prices continued to ease from recent record highs.

Major Market Indices

The stock market, as measured by the broad Standard & Poor’s 500-stock index, has risen 6.4 percent since Oct. 25, boosted by a continued decline in oil prices, President Bush’s election victory on Wednesday last week and Friday’s better-than-expected employment report for October. The S&P 500 index closed Friday at its highest level in two and a half years.

But some investors are already asking if, with a lack of catalysts to drive it higher, the stock market can hold on to its solid advance. Indeed, keeping Wall Street in a funk Monday was the weakening U.S. dollar, which sank to a record low against the euro, and the outlook for U.S. interest rates. Investors expect the U.S. Federal Reserve to raise a key borrowing rate at this Wednesday’s policy meeting.

A key concern for the market is the possibility that the Fed may not only raise a key interest rate this week, but also at meetings in December and February said Bob Doll, Chief Investment Officer at Merrill Lynch Investment Managers. Higher interest rates hurt stocks by reducing corporate profits and make fixed-income securities more attractive investments.

Doll said he is monitoring “the three E’s” for guidance on the future of the stock market.

“Will earnings continue to be above expectations? Will energy prices continue to behave? Will the election results allow the President and Congress to enact the equity-friendly legislation they have proposed?” Doll wrote in a note to investors Monday. “If energy prices and earnings cooperate and if the geopolitical environment remains no worse than it is today, we believe the current equity rally is likely to continue,” he added.

Joseph Keating, chief investment officer at AmSouth Asset Management, had a similarly sanguine outlook.

“We had such a beautiful confluence of event last week, with a smooth election, with Bush winning a second term, and with Friday’s outstanding jobs report,” Keating said. “Now we’re seeing a very healthy pause as investors start to plan for the long term, as opposed to last week’s knee-jerk reactions.”

The Dow Jones industrial average was up 3.77 points, or 0.04 percent, at Monday’s close, while the broader S&P 500 index was down 1.28 points, or 0.1 percent. The Nasdaq composite index, full of technology stocks, closed the day up a fraction of a point, or 0.02 percent.

Crude futures tumbled as investors, reassured by last week’s oil inventory figures, grew more confident that the United States would have enough heating oil for the winter. A barrel of light crude eventually settled at $49.09, 52 cents lower on the New York Mercantile Exchange.

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“I think this is a good day, even if the market isn’t up,” said Hugh Johnson, chief investment officer at First Albany. “So long as oil remains stable at or near these current levels, the market’s likely to manage any round of market taking the way it has so well today.”

A number of stocks were pressured by fresh disclosures of government investigations. The Securities and Exchange Commission is reportedly probing trading practices at brokerages including Morgan Stanley, Merrill Lynch and Charles Schwab, believing that the brokerages processed trades to benefit themselves rather than their clients.

Shares of Morgan Stanley fell 1.5 percent to $52.93, Merrill Lynch’s stock price slipped 1.1 percent to $55.82 and Schwab’s share price declined 0.9 percent to $9.63.

Shares of H&R Block rose a fraction of a point to $49.59 even though U.S. securities regulator NASD charged the tax preparation firm with fraudulently promoting Enron bonds shortly before the energy firm declared bankruptcy.

Software giant Microsoft announced a $536 million settlement with Novell over alleged anti-competitive practices in Europe. However, Novell said it would fill its own U.S. antitrust case against Microsoft this week. Shares of Microsoft rose a fraction of a percentage point to $29.28, while Novell’s share price jumped 9.5 percent to $7.51.

(MSNBC is a Microsoft-NBC joint venture.)

Investors were encouraged by McDonald’s sales report for October, which saw a 7 percent increase in fast food outlets open at least a year. Shares of McDonald’s advanced 0.5 percent to $30.20. And Taser International’s share price surged 16.4 percent to $54.12 after the Transportation Safety Administration approved the company’s non-lethal stun weapons for use by air marshals on commercial aircraft.

Overseas, Japan’s Nikkei average fell 0.7 percent. In Europe, Britain’s FTSE 100 was down 0.5 percent, Germany’s DAX gained 0.1 percent and France’s CAC-40 slipped 0.1 percent.

The Associated Press contributed to this report.

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