Wall Street closed out a difficult week with a small gain Friday, even as many investors, concerned over yet another spike in oil prices and a drop in consumer confidence, stayed on the sidelines. The major indexes ended the week mixed, with tech stocks pummeled by disappointing earnings outlooks.
Oil prices closed at $46.58, up $1.08, on the New York Mercantile Exchange, reaching another record high and giving greater credence to investor fears that oil may have to reach $50 or beyond before falling back.
Wall Street was also worried about the economy. The University of Michigan reported that overall consumer confidence levels softened unexpectedly in mid-August amid a big drop in consumers’ views on the economic outlook. News that the trade deficit ballooned 19.1 percent from May to June also helped undermine the market’s gains.
“There’s still a lot of uncertainty in the market right now, and coming in during such a traditionally slow month, there’s just not a lot going on,” said Michael Murphy, head trader with Wachovia Securities in Baltimore. “Valuations are appealing in a lot of sectors, but with the conventions coming up and oil dominating everything, big investors are just sitting on their hands.”
The Dow Jones industrial average gained 10.76, or 0.1 percent, to 9,825.35.
Broader stock indicators were also narrowly higher. The Standard & Poor’s 500 index was up 1.57, or 0.2 percent, at 1,064.80, while the tech-focused Nasdaq composite index climbed 4.73, or 0.3 percent, to 1,757.22, buoyed by positive earnings from Dell Inc.
Despite Thursday’s massive selloff, the major indexes were mixed for the week. The Dow and the S&P 500 both edged 0.1 percent higher, while the Nasdaq fell 1.1 percent.
Friday’s trading was dominated by the same issue that sent stocks gyrating throughout the week: oil prices. As oil futures kept climbing on world markets, Wall Street grew increasingly uneasy about the possibility of accelerating inflation, especially when economic growth seems uncertain.
Moreover, with oil prices rising, fewer jobs being created and stocks tumbling, consumer confidence is waning. The University of Michigan’s consumer confidence index had a preliminary reading of 94 in August, down from the 96.7 reading in July, according to Dow Jones Newswires. With consumer spending a large part of the overall economy, Wall Street was nervous that the lack of confidence could affect corporate profits in the third and fourth quarters.
The Commerce Department said the trade deficit jumped to $55.82 billion in June, up from $46.88 billion in May. In a time when consumer spending is dropping, that left investors concerned that what little Americans were spending was going overseas.
However, the government also reported that wholesale prices rose just 0.1 percent in July, with lower food prices offsetting higher fuel prices. With the high price of oil spurring inflation concerns, the wholesale price report showed that, at least for now, inflation remains in check.
“The big concern continues to be the price of oil and whether it’ll continue its march to $50 (per barrel),” said Keith Keenan, vice president of institutional trading at Wall Street Access. “If this keeps up, economic growth is going to be far weaker than people are expecting in the second half. But if you get an appreciable drop in oil, this market’s going to rip higher.”
Tech stocks received a small boost from Dell, whose sunny outlook for 2004 was a welcome relief from the disappointing outlooks from Hewlett-Packard Co. and Cisco Systems Inc. earlier in the week. Analysts, however, maintain that technology shares, semiconductors in particular, remain oversold.
Dell rose $1.39 to $34.51 after matching Wall Street expectations in its second-quarter profit. The computer maker said its third quarter, the back-to-school season that drives much of the personal technology industry’s profits, looked positive.
Software maker Agilent Technologies Inc. rose 84 cents to $20.52 after announcing a third-quarter profit, compared to its year-ago loss. The company beat Wall Street expectations by 2 cents per share.
PalmSource Inc., creator of software for the popular Palm handhelds, said chairman Eric Benhamou will step down in late October. Benhamou will remain chairman of palmOne Inc., which makes the handhelds themselves. PalmSource was down 12 cents at $18.03, while palmOne dropped 10 cents to $38.00.
Advancing issues outnumbered decliners by about 7 to 6 on the New York Stock Exchange, where volume came to 1.17 billion shares, compared with 1.4 billion at the same point on Thursday.
The Russell 2000 index of smaller companies was up 0.29, or 0.1 percent, at 517.39.
Overseas, Japan’s Nikkei stock average tumbled 2.5 percent. In afternoon trading, Britain’s FTSE 100 closed down 0.6 percent, France’s CAC-40 dropped 0.3 percent for the session, and Germany’s DAX index fell 0.3 percent in late trading.