Another late rally gave Wall Street a modest advance Friday despite a spike in oil prices and a lower-than-expected hike in the gross domestic product that raised new questions about the economy. The major indexes ended the week higher for the first time in over a month, but ended July with steep losses.
With the GDP rising by just 3 percent in the second quarter — Wall Street had been expecting 3.8 percent — the slowdown in the economy was more severe than first thought. That led very light volume and a narrow trading range, as many investors kept to the sidelines.
Only an afternoon surge of buying — the second this week — pushed stocks higher. Analysts noted that late-day buying is common at the end of the month as mutual funds and large investors adjust portfolios and purchase options.
Climbing oil prices also gave investors more to worry about. A barrel of light sweet crude closed at a record $43.80, up $1.05, on the New York Mercantile Exchange, and prices showed no signs of retreat.
“Oil prices may go up even further before they go down,” said Keith Keenan, vice president of institutional trading at Wall Street Access. “I think there’s probably a six to eight dollar premium on prices because of terror worries, and I don’t see that going away any time soon.”
The Dow Jones industrial average was up 10.47, or 0.1 percent, at 10,139.71. The Dow was up for the fourth straight session, the first time that’s happened since early April.
Broader stock indicators were narrowly higher. The Standard & Poor’s 500 index was up 1.29, or 0.1 percent, at 1,101.72, and the Nasdaq composite index gained 6.30, or 0.3 percent, to 1,887.36.
All three major indexes ended the week higher. The Dow gained 1.8 percent after five weeks of losses, the S&P 500 rose 1.4 percent after six losing weeks and the Nasdaq was up 2.1 percent after four down weeks.
However, despite the week’s gains, the market ended July sharply lower. For the month, the Dow fell 2.8 percent, the S&P 500 was down 3.4 percent and the Nasdaq suffered a 7.8 percent loss. Concerns over third- and fourth-quarter earnings, oil prices and economic health outweighed an otherwise strong second-quarter earnings season, and July’s losses could spill into August as economic issues take over the debate.
While the GDP data is an important indicator for the overall health of the economy, investors already knew that the economy hit a “soft spot,” as Federal Reserve Chairman Alan Greenspan put it, in June. The next round of economic figures for July, starting with job creation figures next Friday, will carry even greater weight as Wall Street tries to discern whether the soft spot will continue.
However, some investors were consoled by the fact that inflation no longer seems to be an issue, and that the Fed might relax its plans for future interest rate hikes. The Commerce Department report did note that an important inflation gauge, excluding energy and food, rose at an annual rate of 1.8 percent in the quarter, down from a 2.1 percent hike in the first quarter.
Analysts also noted that the economy was still moving forward, even if it has slowed somewhat.
“Three percent is 3 percent, no matter how you look at it,” said Brian Belski, fundamental market strategist at Piper Jaffray. “You can slice it and dice it however you want, but it’s still growth.”
Despite the slowdown, consumer confidence rose in July. The University of Michigan’s consumer confidence index rose to 96.7 for the month, up from 95.6 in June and better than the 96 reading Wall Street had expected.
Retailer Target Corp. will generate $1.65 billion in cash with the sale of its struggling Mervyn’s department stores to an investment consortium. Target was down 73 cents at $43.60.
ChevronTexaco Corp. climbed 17 cents to $95.65 as it announced a doubling of its second-quarter profits from a year ago. The petroleum giant blew past Wall Street expectations by $1.12 cents per share, though that figure includes 79 cents per share in one-time benefits.
Archer Daniels Midland Co. did not fare as well, posting a second-quarter loss due to litigation costs. The agricultural processor missed analyst estimates by a penny, and shares dropped 62 cents to $15.43.
Restructuring and cost-cutting helped Eastman Chemical Co. to more than double its profits in the quarter and beat Wall Street expectations by 4 cents per share. Eastman gained 2 cents to $44.68.
Advancing issues outnumbered decliners by more than 5 to 4 on the New York Stock Exchange, where volume came to 1.3 billion shares, compared with 1.52 billion on Thursday.
The Russell 2000 index of smaller companies was up 1.44, or 0.3 percent, at 551.27.
Overseas, Japan’s Nikkei stock average rose 1.9 percent. In Europe, Britain’s FTSE 100 closed down 0.1 percent, France’s CAC-40 gained 0.1 percent for the session and Germany’s DAX index rose 0.2 percent.