Wall Street trudged through an indecisive session Wednesday, anxious again about a possible terrorist attack and also worried that the economy might be slowing more than investors have hoped. Prices closed mixed with tech stocks and small-cap shares rising while large-caps edged lower.
The market’s terrorism fears were reawakened as the government warned of intelligence that al-Qaida is determined to attack the United States this summer. And Commerce Department reports of a decline in durable goods orders and a drop in new home sales provided some evidence that the booming economy was cooling.
But stocks weren’t overwhelmed by the uncertainty; they traded in a very narrow range one day after the Dow Jones industrial average gained nearly 160 points. Analysts said the move to tech stocks and small-caps showed that despite the market’s many concerns, investor sentiment has turned around since the heavy selling that marked March and April.
“Right now, there’s not that much that’s going to push things higher, and that’s fine. We see these kind of sideways-trading cycles in bull markets,” said Kevin Caron, market strategist for Ryan, Beck & Co. “Barring a terrorist attack or a significant disruption in the economy, what you’re going to be looking at is a rising market after the second quarter earnings results come in around July and August.”
The Dow index was down 7.73 points, or 0.1 percent, at 10,109.89 by the close, while the broader Standard & Poor’s 500-stock index was up 1.89 points, or 0.2 percent, at 1,114.94. The Nasdaq composite index rose 11.50 points, or 0.6 percent, to 1,976.15.
The Commerce Department reported that orders for durable goods — products expected to last at least three years — dropped by 2.9 percent last month, the biggest one-month slide since September 2002. Economists had been expecting a 0.8 percent drop. However, orders rose substantively in February and March, leading most analysts to believe that the drop is merely a temporary drop and not the start of a major trend.
Meanwhile, new home sales fell by 11.8 percent to 1.09 million units, the lowest level since November. The drop was blamed on higher mortgage rates. The average rate on a 30-year mortgage in April was 5.83 percent, up from 5.45 percent in March.
The data left many investors wondering about the direction of the economy. While a cooling down of economic growth helped alleviate interest rate concerns, the question became whether too much cooling would be a good thing. Analysts said that until stronger data on the economy is available — and the Federal Reserve acts upon it by raising interest rates — the markets would remain uncertain, with stocks bouncing within a narrow band.
The latest warnings of a possible terror attack in the U.S. surprisingly had little immediate effect, but that could soon change, said Michael Sheldon, chief market strategist at Spencer Clarke LLC.
“We’ve seen terror concerns, along with the situation in Iraq, weigh pretty heavily on the markets,” Sheldon said. “I don’t think this latest alert is priced in yet, and depending on how serious it is, it could cause a drop over the next few days, or at least keep stocks in this range.”
Wells Fargo & Co. rose 37 cents to $59.12 after announcing it has purchased $34 billion in mutual fund assets and institutional investment accounts from investment firm Strong Capital Corp.
Polo Ralph Lauren Corp. fell 60 cents to $33.00 after beating Wall Street expectations of its first-quarter earnings by a penny per share. The apparel company reiterated its earnings outlook for the year.
Furniture maker La-Z-Boy Inc. dropped $1.00 to $18.19 after swinging to a loss in the first quarter after writing down impaired assets. Sales were up only slightly from a year ago, the company said.
TiVo Inc. added 264,000 subscribers to its television playback services in the quarter, though its loss widened compared to a year ago. TiVo gained 43 cents to $7.99.
Advancing issues outnumbered decliners by about 4 to 3 on the Big Board, where volume was moderate. The Russell 2000 index of smaller companies rose 2.38 points, or 0.4 percent, to 567.77.
Overseas, Japan’s Nikkei stock average rose 1.7 percent. Britain’s FTSE 100 closed up 0.5 percent, France’s CAC-40 gained 1.4 percent for the session and Germany’s DAX index rose 1 percent.