- The Washington Times - Friday, August 19, 2005

NEW YORK (AP) — Wall Street struggled through an indecisive session yesterday, finishing mixed as investors grappled with higher energy costs, the prospect of declining earnings growth and a slower economy.

Oil prices were volatile throughout the session, and investors remained jittery about economic growth curtailed by high gasoline and heating oil prices. A barrel of light crude settled at $63.27, up 2 cents, on the New York Mercantile Exchange after falling well below $63 per barrel during the day.

The Conference Board’s latest reading of its Composite Index of Leading Economic Indicators, a forecast of economic activity, was encouraging with its prediction of modest economic growth. The index posted a 0.1 percent increase in July, less than the 0.2 percent economists had estimated and a sharp drop from the 1.2 percent increase in June.

With mediocre economic data and little change in oil prices, the meandering trading session was unsurprising. However, the lack of a major sell-off in recent days was cause for optimism, analysts said.

“The market is behaving like you’d expect it to,” said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. “Certainly, oil is going to be volatile, but earnings remain strong and the economic data is OK. I think we can expect a reasonable reacceleration of the market in the second half.”

The Dow Jones Industrial Average rose 4.22, or 0.04 percent, to 10,554.93.

Broader stock indicators were modestly lower. The Standard & Poor’s 500 index dropped 1.22, or 0.1 percent, to 1,219.02, and the Nasdaq Composite Index lost 9.07, or 0.42 percent, to 2,136.08.

Bond prices surged one day after inflation worries prompted a sell-off. The yield on the 10-year Treasury note fell to 4.21 percent from 4.27 percent late Wednesday. The dollar rose against most major currencies, while gold prices fell.

The latest report on unemployment was disappointing for stock investors. The Labor Department said the number of people making first-time unemployment claims rose to 316,000 last week, up from 310,000 the previous week and higher than economists had expected.

Despite high crude oil prices and their growing impact on consumer spending, many analysts remain bullish and were cheered by the market’s relatively minor losses of late, noting that they came on light volume.

“Pullbacks are healthy, and with it coming on light volume, it just tells you that, yeah, people are worried, but they’re not bailing out entirely,” said Bill Groenveld, head trader at VFinance Investments. “Yes, oil’s a worry, and that’s going to be a month-to-month thing to watch. But economic growth is there and earnings are there.”

Google Inc. pressured the technology sector after the company announced it would sell up to $4 billion in a secondary stock offering. The company said it would use the money for general purposes as well as potential acquisitions, although Google added that it had no particular takeover in mind. Google fell $5.11 to $279.99 on the news.

Morgan Stanley lost 55 cents to $52.30 after the venerable Wall Street firm announced that it would keep its Discover card division in-house instead of spinning it off. The company instead will sell its aircraft leasing business and take a $1 billion charge in the third quarter to write down its value.

The retail sector was battered by more disappointing earnings and profit forecasts. Hot Topic Inc. fell $1.67 to $14.14 after it cut its forecasts for the third and fourth quarters. The teen apparel seller’s second-quarter earnings missed analysts’ expectations by a penny per share.

Limited Brands Inc. also saw its second-quarter earnings decline, but still managed to beat Wall Street profit forecasts by 3 cents per share. Like other retailers, the operator of Victoria’s Secret, Bath & Body Works, Express and Limited Stores issued a full-year earnings forecast that was lower than analysts had expected. Limited Brands dropped $1.17 to $22.11.

Home Depot Inc. added 8 cents to $40.70 after the Dow industrial declared a 10-cent cash dividend and authorized an additional $1 billion stock repurchase program.

Declining issues outnumbered advancers by about 3-to-2 on the New York Stock Exchange, where volume came to 1.4 billion shares, compared with 1.42 billion traded on Wednesday.

The Russell 2000 index of smaller companies fell 3.63, or 0.55 percent, to 651.19.

Overseas, Japan’s Nikkei stock average rose 0.28 percent. In Europe, Britain’s FTSE 100 closed down 0.44 percent, France’s CAC-40 lost 0.22 percent for the session, and Germany’s DAX index fell 0.41 percent.

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