Sunday, May 18, 2008

Stocks recover poise after slipping

Stocks were mixed Friday, with the S&P 500 managing to eke out a multi-month high, despite record oil and gas prices and a weak consumer sentiment index.

The Dow Jones industrial average (INDU) lost a few points. The broader Standard & Poor's 500 (SPX) index inched higher, ending at its highest point since Jan. 3. The Nasdaq composite (COMP) slipped 0.2%.

Stocks rose through most of the week, with the S&P 500 ending Thursday's session at a more than 4-month high.

But after such a run, stocks retreated a bit Friday, as record commodity prices revived fears about how inflation will hit an already weakened consumer and U.S. economy. That runup overshadowed any relief about a better-than-expected housing market report.

"We had some decent news this morning on the housing front, and the economic and earnings news all week hasn't been bad," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "But you've got oil up a couple of dollars today and it's also a Friday, so you're seeing a little selling."

Economic news: April new-home construction rose to a seasonally adjusted annual rate of 1,032,000, the government said. That topped economists' forecasts, thanks to apartment construction. But the single-family housing start measure, considered to be key, fell to another 17-year low.

Building permits rose to a seasonally adjusted annual rate of 978,000, also topping forecasts. (Full story).

The University of Michigan's consumer sentiment index for May fell to 59.5 from 62.6 in the previous month, versus forecasts for a drop to 62.

Treasury Secretary Henry Paulson, speaking Friday afternoon, said he expects to see the pace of U.S. economic growth pick up by the end of the year.

Meanwhile, the United Nations warned the world economy could see a severe downturn, with growth of just 1.8% expected this year, as a result of the U.S. housing and financial market bust. (Full story).

Company news: General Electric (GE, Fortune 500) said it is looking to get out of the appliance business, confirming reports Thursday that speculated a sale price in the $6 billion range. (Full story).

Yahoo responded late Thursday to activist shareholder Carl Icahn's plan to unseat the Internet firm's board and push through a deal with Microsoft (MSFT, Fortune 500), essentially holding its ground. Yahoo (YHOO, Fortune 500) shares were barely changed Friday. (Full story).

A number of retailers reported better-than-expected earnings, including Abercrombie & Fitch (ANF), Nordstrom (JWN, Fortune 500) and Kohl's (KSS, Fortune 500). Abercrombie shares were flat, Nordstrom shares rose and Kohl's shares fell.

On the upside, the spike in oil prices boosted oil services stocks, including Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500) and Marathon Oil (MRO, Fortune 500).

The Amex Oil index jumped 2.7%.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers on volume of 1.31 billion shares. On the Nasdaq, decliners beat advancers 4-to-3 as 2.29 billion shares changed hands.

Commodity prices: U.S. light crude oil for June delivery rallied $2.17 to close at a record $126.29 a barrel on the NYMEX, after hitting an all-time electronic trading high of $127.82 earlier. Prices briefly came off the highs after the United States said it will suspend shipments to the Strategic Oil Reserves, starting in July. However, analysts say the move will have little impact on oil and gas prices.

The national average price for a gallon of regular unleaded gas rose to a record $3.787 from $3.776 the previous day, according to AAA. It was the 9th record in a row.

COMEX gold for August delivery rose $20 to settle at $904.10 an ounce.

Other markets: The dollar fell versus the euro and yen.

Treasury prices were little changed, with the yield on the 10-year note at 3.84%, roughly where it stood late Thursday after having fluctuated through the session. Bond prices and yields move in opposite directions.

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