Bombings at three hotels in Jordan erased most of an afternoon rally on Wall Street Wednesday, leaving stocks with only marginal gains as fears about terrorism resurfaced.
The day ended with stocks such as Google Inc. and Marvel Entertainment Inc. down sharply. Before the bombings, stocks had advanced modestly as investors hoping for a fourth-quarter rally did their best to create one.
Investors had spent the morning worrying about consumer spending after PepsiCo Inc. reduced its year-end forecast and said it would restructure. Traders were already concerned about spending after high-end home builder Toll Brothers Inc. cut its 2006 forecast Tuesday. A pullback by PepsiCo’s much broader customer base is even more worrisome.
The morning’s declines triggered short-covering and program buying. Stocks were also boosted by portfolio churn as managers took profits where they could and moved into other equities.
The Dow Jones industrial average rose 6.49, or 0.06 percent, to 10,546.21.
Broader stock indicators also closed slightly higher. The Standard & Poor’s 500 index rose 2.06, or 0.17 percent, to 1,220.65, and the Nasdaq composite index rose 3.74, or 0.17 percent, to 2,175.81.
Bonds fell sharply, with the yield on the 10-year Treasury note rising to 4.65 percent from 4.55 percent late Tuesday. The U.S. dollar was mixed against other major currencies, rising near a two-year high against the euro on concerns about violence in France and political uncertainty in Germany. Gold prices rose.
Crude oil futures fell. A barrel of light crude fell 78 cents to settle at $58.93 a barrel — the lowest levels in three months — on the New York Mercantile Exchange.
Stocks remain nearly flat for the year and strategists are split between those who think a fourth-quarter rally is almost certain and those who recommend investors shift capital away from stocks and toward cash and bonds.
William Hummer, chief economist at Wayne Hummer Investments, is in the first group. He argues that steady interest rates, solid earnings and a strengthening U.S. dollar will propel the market higher.
“I see stocks being as undervalued now as they were at the end of 1999,” he said.
By contrast, Merrill Lynch’s U.S. Strategy report for November said, “cash obviously beats our expected return,” for the S&P 500.
Wednesday’s only meaningful economic release was the mostly ignored wholesale inventories. On days when news is thin, the market can move merely because one group has decided to make their play.
In company news, PepsiCo closed unchanged at $58.30 after it announced its restructuring.
Google fell $10.75 to $379.15 and Marvel fell $3.98 to $14.06 after it forecast a difficult 2006.
American International Group Inc., one of the world’s largest insurers, said it will again restate its financial results, this time through 2002, as part of a long internal probe of its accounting. The company restated five years of results and cut shareholders’ equity by $2.26 billion in late May. An investigation found additional errors, which caused it to understate previous consolidated results by $500 million, forcing a new restatement of its 2002, 2003 and 2004 fiscal years. AIG rose 52 cents to $66.37 after analysts recommended clients buy on the stock’s dip earlier in the day.
General Motors Corp. traded at a 13-year low after a research note form Deutsche Bank raised questions about what would happen to the auto maker if workers strike at its parts supplier, Delphi Corp. General Motors fell $1.23 to $24.63.
Federated Department Stores Inc., operator of the Macy’s and Bloomingdale’s department store chains, rose $4.94 to $68.85 after it reaffirmed its financial forecast for the fourth quarter and reported that its third-quarter profit climbed more than fivefold from last year, aided by a large gain from an asset sale and earnings from recently acquired May. Earnings from continuing operations also beat expectations.
Pixar Animation Studios Inc. rose $5.71 to $56.59 after its quarterly earnings beat analysts’ estimates and the animation studio told investors that distribution deal talks between Pixar and The Walt Disney Co. are “very productive.” Pixar, the studio behind films such as “Finding Nemo” and “The Incredibles,” is talking with Disney about a new deal that will give Pixar far more ownership of its films.
Tommy Hilfiger Corp. rose 95 cents to $17.75 after a news report that the company has received five separate bids to buy it.
The Russell 2000 index of smaller companies rose 3.60, or 0.55 percent, to 659.83.
Advancing issues led decliners by nearly 8 to 7 on the New York Stock Exchange, where preliminary consolidated volume was 2.18 billion, up from 2 billion Tuesday.
Overseas, Japan’s Nikkei stock average rose 0.25 percent. Britain’s FTSE 100 fell 0.39 percent, Germany’s DAX index rose 0.05 percent, and France’s CAC-40 fell 0.52 percent.