Leslie Wines, MarketWatch
Dec. 20, 2005
U.S. stocks were lower in late afternoon trade Tuesday, as strategists
suggested the year-end rally may be over, while General Motors traded not
far from its all-time low stock price.
The Dow Jones Industrial Average was down 29.22 points at 10,807.31.
The S&P 500 was off 0.41 point at 1,259.51 as the Nasdaq Composite fell
1.62 point to 2,221.12.
Volume on the New York Stock Exchange was more than 1.1 billion shares,
with decliners and rising stocks in roughly equal portions. More than 1.4
billion shares traded in the Nasdaq market with 15 falling stocks for
every 14 rising stocks.
Concerns about weaker volume due to the New York City transit strike
proved overblown and trading volume was about normal for a pre-holiday
week.
However, Michael Benhamou, managing partner at Louis Capital Markets, said
the strike, if it goes on for much longer than a day, has the potential to
impact stocks of companies that do much of their business in New York
City.
He cited Tiffany & Co. Tiffany's flagship store in Manhattan accounts for
10% of group sales and Saks Inc. also does much of its business in the
city, he said.
Benhamou said Starwood Hotels, owner of the St. Regis Hotel and a number
of W Hotels in Manhattan, could benefit from the strike if many commuters
opt to take hotel rooms.
The major averages Tuesday fluctuated often between minor gains and small
losses in uncertain price action.
Some strategists suspect that the better part of the year-end rally took
place in November and the market might be in for a dull remainder of the
year.
"The market hasn't collapsed or anything, but we've been going sideways
for awhile," said Donald Selkin, director of equity research at Joseph
Stevens.
"Individual stocks can go up, but the market is too overbought internally
and there is too much complacency for a rally," Selkin said.
"A lot of people are asking why the market has been off," said Todd Leone,
head of listed trading at S.G. Cowen. "But the market has had a tremendous
runup and the Fed is still raising rates. I think it's healthy
consolidation."
Paul Nolte, director of investments at Hinsdale Associates, said "I'm not
putting a lot of credence in most of the positioning between here and the
year-end."
"I think most of the positioning got unwound last week during 'quadruple
witching,'" Nolte said, referring to Friday's simultaneous expirations of
stock index futures, stock index options, stock options, and single stock
futures.
The Labor Department reported that prices of raw materials and other
producers' inputs fell 0.7% in November, the largest monthly decline since
April 2003.
Excluding food and energy costs, the core PPI rose 0.1%; economists
expected the core rate to rise 0.2%.
Separately, the Housing Department said U.S. housing starts rose 5.3% to
2.123 million units in November, confounding the expectations of
economists surveyed by MarketWatch who had expected a reading almost
unchanged from October.
Crude futures were volatile but remained well below the psychologically
significant level of $60 a barrel.
The front-month contract closed up 64 cents at $57.98 a barrel.
Gold futures closed at their lowest level in almost a month, down $9.10 at
$497 an ounce, as traders gauged physical and investment demand for the
rest of the year. But some analysts think the futures could test the $600
level in the new year.
The dollar improved after the unexpectedly sharp drop in producer-level
inflation, and last traded up 0.91% at 117.06 yen. The euro fell 0.02% to
$1.1864.
Treasurys were trending lower, sending yields higher. The benchmark
10-year Treasury note last was down 7/32 at 100-9/32 with a yield of
4.466%.
The tame producer price report was supportive of Treasurys. But the robust
housing starts figure suggested that housing will continue to power the
economy and indications of economic strength tend to send capital out of
the bond market and toward higher-risk instruments.
Stocks in focus
Morgan Stanley rose 1.7% to $57.61. The investment bank reported a 49%
increase in fourth-quarter net income on growth in its institutional
securities and fixed income businesses.
Both Morgan Stanley's net income and revenue surpassed analysts'
predictions.
Dow component Wal-Mart Stores Inc., which had previously disclosed a
criminal probe into its handling of hazardous waste, revealed a new
criminal probe over possible violations of the Resource Conservation and
Recovery Act.
Wal-Mart stock was down 28 cents at $48.68.
Among other Dow components, embattled General Motors flirted with its
all-time low stock price of $19.54, which it struck in October, 1987.
At one point in morning trade GM stock fell to $19.63, but it later moved
off its lows and last was down 4.8% at $20.04.
Late in Monday's session the auto maker's parts supplier Delphi Corp.
withdrew its contract proposal to its unions, noting GM's recent
engagement and discussions with the United Auto Workers.
In addition, the Wall Street Journal reported that GM could be overtaken
by Toyota as the best-selling auto maker.
Auto parts maker Dana Corp fell 2.8% to $6.66 after announcing it will cut
about 800 jobs in Canada and Australia as supply deals with some customers
expire. The company will take a $28 million charge for the jobs cuts.
According to the Wall Street Journal, Tyco International is near a deal to
sell its plastics unit to private equity group Apollo Advisers for around
$1 billion. Tyco shares rose 1.6% to $28.91.
This MarketWatch news update is provided to you courtesy of Thomson
Financial.
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SOURCE Thomson Financial Corporate Group
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