- The Washington Times - Friday, October 20, 2006

NEW YORK (AP) — Wall Street ended a record-setting week narrowly mixed yesterday, with the Dow Jones Industrial Average falling to close slightly above 12,000 after a lackluster profit report and forecast from Caterpillar prompted many investors to retreat. The Dow was up for the week, but broader market indicators were mixed.

Caterpillar, one of the 30 blue-chip stocks that make up the Dow, unnerved investors who have bet that the slowing economy would pull off a soft landing rather than tip into recession.

“Caterpillar must have taken about 60 to 70 points off the Dow,” said Stephen Carl of Williams Capital Group.

It was optimism about the economy and rising hopes for strong third-quarter earnings that had lifted the Dow into uncharted territory this week. The blue-chip index, reaching its first 1,000-point milestone in 7 1/2 years, traded past 12,000 for the first time Wednesday and had its first close above that mark on Thursday.

The Dow yesterday closed down 9.36, or 0.08 percent, at 12,002.37.

Broader stock indicators showed modest gains after spending much of the session with losses. The Standard & Poor’s 500 Index was up 1.64, or 0.12 percent, at 1,368.60, and the Nasdaq Composite Index rose 1.36, or 0.06 percent, to 2,342.30 following a strong showing by Google Inc.

The Russell 2000 Index of smaller companies was down 5.26, or 0.69 percent, to 762.13.

The Dow rose 0.35 percent for the week, while the S&P; gained 0.22 percent and the Nasdaq fell 0.64 percent. The Dow had shown triple-digit point gains in each of the previous three weeks. Despite the overall gains in the market, the S&P; stands about 10.4 percent below its high close of 1,527.46 and the Nasdaq is 54 percent off. All three indexes had peaked in early 2000 before plunging in response to the dot-com bust, recession and the aftermath of the 2001 terror attacks.

Bonds showed little movement yesterday, with the yield on the benchmark 10-year Treasury flat with 4.79 percent from late Thursday. The dollar was mixed against other major currencies, while gold prices fell.

Joe Battipaglia, chief investment officer at Ryan Beck, contends that while earnings reports have been sound overall, companies are coming in with more guarded forecasts. He also is concerned that falling oil prices could indicate the economy is slowing too quickly.

“Caterpillar today was sort of a splash of cold water on the notion that this economy is in the perfect place and will continue to be,” he said.

Caterpillar fell $10.02 or 14.5 percent, to $59, despite a 15 percent increase in third-quarter profit. Though the company sold more construction and mining equipment, it warned increased costs and weaker-than-expected sales would hurt full-year profits.

Google jumped $33.61, or 7.9 percent, to $459.67 after its profit nearly doubled and revenue surged 70 percent during the third quarter, which is traditionally slower as people spend less time in front of a computer during the summer months.

3M Co. rose $2.07, or 2.7 percent, to $78.47 after posting a 6.4 percent increase in its third-quarter profit amid renewed strength in its business of making films for LCD television and computer screens.

Merck advanced $1.15, or 2.6 percent, to $45.64 after reporting stronger-than-expected earnings and revenue, though earnings were down 34 percent and sales were flat.

SanDisk, which makes flash memory chips, fell $12.58, or 20.4 percent, to $49.15 after reporting a 4 percent decline in its third-quarter profit and forecasting prices would fall by as much as 20 percent in the fourth quarter.

Arch Coal was down $2.22, or 6.5 percent, to $32.04 after lowering its full-year profit forecast because of weakness in the domestic market. Arch also said its third-quarter profit nearly tripled as operating costs fell.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 1.63 billion shares, compared with 1.64 billion Thursday.

Overseas, Japan’s Nikkei stock average closed up 0.61 percent. Britain’s FTSE 100 closed down 0.01 percent, Germany’s DAX was up 0.41 percent, and France’s CAC-40 was up 0.29 percent.

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