- The Washington Times - Monday, March 13, 2006

NEW YORK (AP) — Surging oil prices left stocks little changed yesterday as interest rate worries also diluted Wall Street’s enthusiasm over multibillion-dollar acquisitions in the banking and newspaper sectors.

With no new economic reports from the government, investors turned their focus to the day’s two major deals: Capital One Financial Corp.’s $14.6 billion offer for North Fork Bancorp Inc. and McClatchy Co.’s $4.5 billion bid for newspaper publisher Knight Ridder Inc.

But continued nervousness about higher interest rates, oil and inflation limited Wall Street’s momentum, said Jeff Kleintop, chief investment strategist for PNC Financial Services Group. This week’s reports on consumer price increases and retail sales will feed speculation over whether the Federal Reserve might lift rates as many as three more times, he said.

“We’re certainly looking to see how core [consumer] prices come in,” Mr. Kleintop said. “If they continue to show a bit of upward pressure, that could push up rates and affect the market.”

At the close of trading, the Dow Jones Industrial Average slipped 0.32 to 11,076.02. The Dow advanced as much as 40 points early in the session.

The broader stock indicators tapered earlier gains. The Standard & Poor’s 500 index added 2.55, or 0.2 percent, to 1,284.13, and the Nasdaq Composite Index rose 4.99, or 0.22 percent, to 2,267.03, after losing 1.76 percent last week.

Bond prices extended last week’s decline, with the yield on the 10-year Treasury note edging up to 4.77 percent from 4.76 percent late Friday. The dollar lost ground against other major currencies. Gold prices slipped.

Crude futures jumped as anxiety about political tension in major oil-producing nations countered reports of growing U.S. reserves. A barrel of light crude added $1.81 to settle at $61.77 on the New York Mercantile Exchange.

Mr. Kleintop said the market appeared to have some momentum from last week’s jobs data and should react to several key reports scheduled for this week, including import and export prices, housing starts and consumer confidence. However, many traders already are looking ahead to the Fed’s March 28 meeting, when the central bank is expected to boost the federal funds rate a 16th consecutive time.

Although signs of economic strength — both in the United States and overseas — are reason for investors to anticipate higher interest rates, it is too soon to tell whether the central bank will lift rates above 5 percent, said Brian Gendreau, investment strategist at ING Investment Management.

“The Fed has said they’re going to be data-dependent,” Mr. Gendreau said. “A lot is going to depend on what the world looks like at their June meeting. And June is a long ways off, so I think that’s a little premature.”

McClatchy, which is planning to sell about a third of Knight Ridder’s newspapers, also is assuming about $2 billion of the company’s debt as part of the agreement. McClatchy lost $1.51 to $51.55; Knight Ridder initially gained ground but ended down $1.08 at $63.92.

Credit-card issuer Capital One agreed to buy North Fork in a stock-and-cash deal equal to a 23 percent premium to North Fork’s Friday closing price of $25.40. Capital One dropped $6.82 to $83.10, while North Fork added $3.80 to $29.20.

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