Thursday Financial

Stocks Waver on Concerns About Consumer

Thursday November 15, 12:40 pm ET
By Madlen Read, AP Business Writer

Wall Street Fluctuates Following Data on Consumer Price Inflation and Commercial Debt Market


NEW YORK (AP) -- Wall Street fluctuated Thursday as investors grappled with concerns about the strength of consumer spending but were also cheered by data showing companies might be having an easier time obtaining financing for short-term debt.
ADVERTISEMENT


The Labor Department's Consumer Price Index rose 0.3 percent in October on high energy and foods costs, in line with September's increase and analysts' forecast. Investors are concerned that rising inflation -- especially due to higher fuel prices -- could move consumers to cut back their overall spending and also prevent the Federal Reserve from lowering interest rates further in the coming months.

In addition, the market for U.S. short-term corporate debt known as commercial paper decreased by $3.6 billion in the week ended Wednesday, well below the $15.6 billion contraction seen a week earlier. The Federal Reserve figures appeared to boost investor sentiment about the state of the credit markets, which has been tight in recent months amid concerns about bad mortgage debt.

The Philadelphia Federal Reserve said regional manufacturing activity expanded in November at about the same "modest" pace seen in October. The bank's November business index rose to 8.2 from 6.8 in October.

Robert A. Dye, senior economist at PNC Financial Services Group, is concerned readings on consumer prices and Wednesday's report on producer prices indicate the economy could start to feel pressure in coming months from higher energy costs as well as a weakening dollar.

"This number tells us that we might be concerned that the Fed might not have the leeway we thought it had a few months ago to ease the fed funds rate," he said, referring to the CPI report and the Fed's efforts to keep inflation in check.

In midday trading, the Dow Jones industrial average fell 7.97, or 0.06 percent, to 13,223.04.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 4.83, or 0.33 percent, to 1,465.75. The Nasdaq composite index fell 5.98, or 0.23 percent, to 2,638.34.

Government bond prices rose. The yield on the 10-year Treasury note, which moves opposite its price, slid to 4.22 percent from 4.25 percent late Wednesday.

Oil prices slipped on the New York Mercantile Exchange, where a barrel of light, sweet crude fell $1 to $93.09. Gold prices fell as the dollar strengthened.

In other economic news, the number of laid off workers filing claims for unemployment benefits rose last week by 20,000 to 339,000, double what economists expected.

Investors also looked to corporate news. J.C. Penney Co. reported a 9 percent drop in fiscal third-quarter profit on weak sales and cut its fourth-quarter outlook, indicating that housing market problems are taking a toll on shoppers, as well. J.C. Penney fell $2.40, or 5.1 percent, to $44.33.

Investors also reacted to a Barron's report late Wednesday that a General Electric Asset Management bond fund has suffered losses in mortgage-backed securities. The General Electric Co. unit is offering investors the option to redeem their holdings in the short-term institutional bond fund at 96 cents on the dollar. The losses in the bond fund raised concerns that the squeeze on credit markets could spread and hurt small investors. GE fell 41 cents to $38.60.

Barclays Group PLC fell 47 cents to $43.41 after its Barclays Capital investment unit became the latest financial institution to book a writedown on losses stemming from turbulent credit markets. The business took a $2.7 billion charge in the third quarter but the also said Thursday its profit beat last year's strong performance.

Tyco International Inc. said its fiscal fourth-quarter profit slid 85 percent due to costs related to restructuring and the spin-off of the former conglomerate's health care and electronics units. For the full year, Tyco swung to a loss of $1.74 billion compared with a profit of $3.6 billion last year. Tyco fell 47 cents to $38.84.

Ralcorp Holdings Inc., a maker of private-label cereals, said it will buy Kraft Food Inc.'s Post cereals division for $1.65 billion plus $950 million in debt.

Kraft fell 13 cents to $32.85, and Ralcorp rose $5.78, or 10.4 percent, to $61.25.

Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 511.2 million shares.

The Russell 2000 index of smaller companies fell 6.66, or 0.85 percent, to 775.81.

Major stock indexes overseas slumped. Britain's FTSE 100 declined 1.13 percent, Germany's DAX index fell 1.49 percent, while France's CAC-40 shed 0.93 percent.

Japan's Nikkei stock average closed down 0.67 percent and Hong Kong's Hang Seng index fell 1.42 percent.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com