May 2, 2006 > Stocks fall on Microsoft outlook
Stocks fall on Microsoft outlook
by Christopher Wang AP Business Writer
NEW YORK (AP), Apr 28 _ Stocks finished mostly lower Friday as rising oil prices and a tepid outlook from Microsoft Corp. dampened Wall Street's reaction to a rebound in first-quarter economic growth. The major indexes ended mixed for the week and for April.
Coupled with lower-than-expected results for the latest quarter, Microsoft's reduced forecast sent its stock falling more than 11 percent and led a broader decline in the Nasdaq composite index.
The earnings disappointment overshadowed news that the gross domestic product grew 4.8 percent last quarter, up from a 1.7 percent rise in the fourth quarter. The gain was less than economists' estimates of 4.9 percent, which suggested the economy is expanding at a comfortable pace.
But while the GDP's inflation component surged 3.3 percent _ well ahead of a 2.7 percent target _ the Labor Department said employment costs grew just 0.6 percent last quarter, the smallest rise since 1999 and behind views of 0.9 percent.
Art Hogan, chief market analyst for Jefferies & Co., said the economic data were benign for inflation and the debate over interest rates, and noted a recovery among commodities and energy prices.
``With that as a backdrop, I'm not surprised to see'' the Nasdaq down and little changes in the other major indexes, Hogan said. ``Of course, when you have a marquee name like Microsoft disappoint, it's hard to sit up on good news.''
The Dow Jones industrial average dropped 15.37, or 0.14 percent, to 11,367.14.
Broader stock indicators ended mixed. The Standard & Poor's 500 index added 0.89, or 0.07 percent, to 1,310.61, and the Nasdaq fell 22.38, or 0.95 percent, to 2,322.57.
Bonds climbed on the GDP data, with the yield on the 10-year Treasury note slipping to 5.07 percent from 5.11 percent late Thursday. The dollar was mixed against other major currencies, and gold prices surged.
Crude futures recovered from four days of losses, lifted by supply worries after the International Atomic Energy Agency said Iran defied the U.N. Security Council by enriching uranium. A barrel of light crude rose 91 cents to settle at $71.88 on the New York Mercantile Exchange.
Wall Street also weighed a dip in consumer confidence as soaring gasoline prices threatened discretionary spending. The University of Michigan's April consumer-sentiment index slid 1.8 points to 87.4, while economists expected a 0.2-point drop.
Erratic trading left the major indexes flat for the week, with the Dow gaining 0.17 percent and the S&P 500 off 0.05 percent. The Nasdaq lost 0.87 percent after Friday's decline gave back most of its advance from earlier in the week.
For the month, however, the Dow jumped 2.32 percent and the S&P 500 added 1.22 percent, while the Nasdaq slid 0.74 percent. The Dow and S&P 500 earned much of their April gains from recent indications that the Federal Reserve may soon pause or halt its series of interest rate hikes.
Analysts say the overall mood of the market has improved as government reports continue painting an uplifting picture of the economy. Now that the Fed may have boosted rates just enough to stifle demand, the market is looking for growth to gently taper in the latter half of the year, said Ed Keon, chief investment strategist for Prudential Equity.
``There's still some danger that inflation could pick up, and higher energy prices could feed into that,'' Keon said. ``But overall, it does not look like substantial inflationary pressures are developing.''
Software giant Microsoft's earnings saddled the tech sector, and its shares fell $3.10 to $24.15.
Citigroup Inc. gave the Dow some support after Piper Jaffray upgraded the financial services firm to ``outperform,'' citing improving margins and a pickup in the capital markets. Citigroup rose $1.80 to $49.95.
Prudential Equity's upgrade of the banking sector lifted stocks elsewhere, with JPMorgan Chase & Co. adding $1.43 to $45.38, and Bank of America Corp. rising 88 cents to $49.92.
Chevron Corp. was the latest U.S. oil company to post a strong quarterly profit, which jumped 49 percent to $4 billion as high energy prices propelled its results. Chevron gained $1.04 to $61.02.
UnitedHealth Group Inc. rose $1.99 to $49.74 following a government report that the health insurer landed the biggest share of participants _ about 27 percent of overall enrollment _ in the new privately administered Medicare drug program.
Advancing issues led decliners by 19 to 13 on the New York Stock Exchange, where final consolidated volume of 2.63 billion shares lagged the 2.99 billion shares that changed hands Thursday.
The Russell 2000 index of smaller companies rose 3.14, or 0.41 percent, to 764.54.
Overseas, Japan's Nikkei stock average lost 1.22 percent. Britain's FTSE 100 fell 0.61 percent, Germany's DAX index slid 0.95 percent and France's CAC-40 was lower by 0.48 percent.
The Dow Jones industrials ended the week up 19.69, or 0.17 percent, finishing at 11,367.14. The S&P 500 index lost 0.67, or 0.05 percent, to close at 1,310.61.
The Nasdaq fell 20.29, or 0.87 percent, to end at 2,322.57.
The Russell 2000 index closed the week down 10.72, or 1.39 percent, at 761.40.
The Dow Jones Wilshire 5000 Composite Index _ a free-float weighted index that measures 5,000 U.S. based companies _ ended the week at 13,280.93, down 29.66 points from last week. A year ago, the index was 11,245.39.
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