- The Washington Times - Friday, March 3, 2006

NEW YORK — Stocks fluctuated before closing slightly lower yesterday after a Federal Reserve governor’s upbeat comments on inflation helped ease worries about a bleak forecast from Intel Corp. The major indexes finished mixed for the week.

The market first fell on Intel’s news, but rallied after Fed Vice Chairman Roger Ferguson suggested that core price inflation was under control and hinted at a moderating fiscal policy from the central bank. An afternoon rise in oil prices — which fed Wall Street’s concerns about inflation — eroded those gains.

Meanwhile, news that the nation’s service sector grew faster than expected last month countered a drop in consumer confidence, lending some stability to a market stifled recently by concerns about more interest-rate increases and rising energy costs.

“In general, there’s still a decent amount of momentum coming off the start of the year, which typically tends to support the market,” said Steven Goldman, chief market strategist for Weeden & Co. “Stocks should hold up well, assuming we don’t get a sharp rise in long-term [bond] rates here.”

At the close of trading, the Dow Jones industrial average lost 3.92, or 0.04 percent, to 11,021.59.

Broader stock indicators also finished lower. The Standard & Poor’s 500 index dropped 1.91, or 0.15 percent, to 1,287.23, and the Nasdaq Composite Index slid 8.51, or 0.37 percent, to 2,302.60.

The Russell 2000 index of smaller companies fell 1.72, or 0.23 percent, to 738.44.

Bonds fell for a third session, with the yield on the 10-year Treasury note rising to 4.69 percent from 4.64 percent late Thursday. The dollar was mixed against other major currencies, while gold prices tumbled.

Crude-oil futures advanced as heightening political tension overseas created supply fears for the energy market. A barrel of light crude added 31 cents to settle at $63.67 on the New York Mercantile Exchange.

The Institute for Supply Management said its nonmanufacturing index climbed 3.3 points to 60.1, compared with economists’ expectation of 58. Meanwhile, the University of Michigan reported its consumer sentiment index slipped 0.7 points to 86.7, while economists had predicted a 0.1 point rise.

Yesterday’s up-and-down trading mirrored the erratic behavior on Wall Street this week as nervous investors reacted sharply to a mix of economic news on the housing market and retail sales, which in turn fed speculation about further rate increases from the Fed. For the week, the Dow lost 0.36 percent and the S&P; 500 fell 0.17 percent, while the Nasdaq gained 0.68 percent.

Despite yesterday’s decline, Jay Suskind, head trader at Ryan, Beck & Co., said he felt Mr. Ferguson delivered a promising message about the underlying strength of the economy and that the existing risks are manageable.

“I think what you have is a manic market,” Mr. Suskind said. “The market reacts differently to the news each day. One day, it’s sure of a strong economy and controlled inflation; the next day, it reads higher rates from the Fed.”

Intel’s warning sent its stock down 17 cents to $20.32, near its 52-week low of $19.88. The chip-maker lowered the midpoint of its projected quarterly revenue by $500 million, adding that its gross margins would also be affected by lower sales.

Novell Inc. further disappointed tech investors with its first-quarter earnings, which plunged sharply from last year as sales slid by 5 percent. The results prompted First Albany Capital to cut Novell to “underperform,” pulling shares $1.63 lower to $7.90.

AK Steel surged $2.65 to $13.99 after a Pittsburgh Post-Gazette report that the firm is in talks to be acquired by United States Steel Corp., boosting shares across the sector. U.S. Steel rose 38 cents to $57.98.

Responding to shareholder pressure, fast-food chain Wendy’s International Inc. said Thursday it may sell its Baja Fresh Mexican Grill restaurants and will speed up the spinoff of coffee chain Tim Hortons through an initial public offering. Wendy’s jumped $2.10 to $60.54.

Google Inc. shares posted a second day of gains after the Web firm eased Wall Street’s concerns about its growth prospects during a Thursday meeting with analysts. Google gained $1.73 to $378.18.

Declining issues led advancers by 19 to 13 on the New York Stock Exchange, where volume of 1.57 billion shares lagged the 1.8 billion shares that changed hands Thursday.

Overseas, Japan’s Nikkei stock average slid 1.55 percent. Britain’s FTSE 100 rose 0.44 percent, Germany’s DAX index sank 1.07 percent and France’s CAC-40 was lower by 0.4 percent.

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