Blue chips gain as oil prices pull back

/ Source: The Associated Press

Conflicting signals on inflation left stock indices mixed Thursday, as investors abandoned riskier stocks and moved to safer blue-chip companies. A sharp drop in crude oil prices buoyed the market in afternoon trading.

A surprising increase in first-time jobless claims unnerved the market but also eased fears among some investors that inflation would rise as more workers enter the job market. The Labor Department reported a jump of 17,000 claims last week, to 327,000 — the highest level in two months.

Inflation worries were bolstered, however, as the dollar fell to a nine-week low against the euro. That stole momentum from crude oil prices — another inflationary concern — which fell after Wednesday’s sharp rise. A barrel of light crude settled at $53.54, down $1.23 on the New York Mercantile exchange.

“This appears to be a fairly defensive market ... while investors figure out what to do next,” said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. “I think the market is still jittery about inflation. There are no real drivers to push us solidly in any direction.”

The Dow Jones industrial average was up 45.89 points, or 0.4 percent, at the close of trading, having lost 107 points on Wednesday. The broader Standard & Poor’s 500-stock index was up 2.24 points, or 0.2 percent, while the tech-rich Nasdaq composite index fell 1.57 points, or 0.1 percent.

The bond market made modest gains after a big sell-off Wednesday. The yield on the 10-year Treasury note fell to 4.47 percent from Wednesday’s eight-month high of 4.53 percent.

“It’s surprising bond yields haven’t been this high beforehand, with seven interest rate hikes from the Fed,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “There are inflationary pressures, certainly, but they’re good inflationary pressures because there’s economic growth here.”

The technology sector was under scrutiny as investors looked at news from two major semiconductor companies. Dow component Intel Corp. edged a penny higher to $24.85 prior to its mid-quarter earnings update, released after the session. The company had a better than expected outlook, raising the low end of its first-quarter revenue projection and forecasting wider gross margins for the same period. Intel stock rose 59 cents, or 2.4 percent, to $25.44 in extended trading.

National Semiconductor Inc. was up $1.13 at $21.12 after the company beat analysts’ profit forecasts by 5 cents per share in its latest earnings report.

Microsoft Corp. announced it was purchasing privately held Groove Networks, which makes software for online work collaboration, for an undisclosed amount. Groove founder Ray Ozzie, one of the creators of Lotus Notes in the 1980s, will become Microsoft’s chief technical officer, reporting to chairman Bill Gates. Microsoft rose 12 cents to $25.43.

(MSNBC is a Microsoft-NBC joint venture.)

Toys R Us Inc. added 62 cents to $23.67 as The Wall Street Journal reported that a private investment group has made a $5 billion proposal to purchase the ailing toy retailer. The company has long proposed separating its profitable Babies R Us unit from the struggling toys unit, and selling the latter.

Delta Air Lines Inc. said it would report a substantial loss for 2005, according to a regulatory filing. The nation’s third-largest air carrier said its cash flow may not be enough to meet its needs by the end of the year. Delta, which blamed pension expenses and skyrocketing fuel costs for its fiscal crunch, saw its shares tumble 56 cents, or 11.5 percent, to $4.33 on the news.

Retailer Urban Outfitters Inc. fell 28 cents to $47.24 even as the company reported a sharp rise in fourth-quarter profits, crediting improved gross margins and strong year-over-year sales at stores open at least a year. The company beat Wall Street profit forecasts by a penny per share.

Overseas, Japan’s Nikkei average fell 0.9 percent. In Europe, Britain’s FTSE 100 closed down 0.7 percent, France’s CAC-40 slid 0.7 percent for the session, and Germany’s DAX index lost 0.9 percent.