Dow suffers minimal losses
US investors pushed stocks lower today, ending Wall Street’s three-day string of gains.
The losses, for the most part, were minimal – an encouraging sign after a difficult January – and analysts said most investors simply sat out of trading while waiting for tomorrow’s job creation report from the Labour Department, a key barometer of economic activity.
However, an earnings report from Amazon.com dragged tech stocks down significantly.
“Today’s trading is overwhelmed by Amazon.com,” said Arthur Hogan, chief market analyst at Jefferies & Co.
The Dow Jones industrial average fell 3.69, or 0.03%, to 10,593.10.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index was down 3.30, or 0.28%, at 1,189.89, while the tech-focused Nasdaq composite index dropped 17.42, or 0.84%, to 2,057.64.
Most major corporations have now reported fourth-quarter earnings, which means the market will be turning to economic indicators for guidance. The government’s employment report will be “the biggest thing all week”, Hogan said. Analysts expect about 200,000 workers were added to the payrolls in January.
In economic news, the Labour Department reported that productivity, or output per worker, rose at an annual rate of just 0.8% in the last three months of 2004 - the smallest quarterly increase in almost three years.
The report could indicate that companies are unable to increase their productivity as fast as they have in recent years, forcing them to hire more workers if they want to boost output.
The Institute for Supply Management said its index of the service sector came in at 59.2 for January, down from 63.9 in the previous month and lower than expectations. Readings above 50 indicate growth in the sector, which comprises about two-thirds of US economic activity.
Philip Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis, said the day’s news was not too dismal in the context of an otherwise fairly strong economy.
“It’s hard to cast the news we’ve seen recently with regards to the economy and earnings as negative,” he said.
He said he was surprised investors were not focusing more on strong January sales reported by retailers this morning, which generally beat expectations.
Amazon.com, however, saw higher costs offset its holiday sales gains. Shares of the online retailer tumbled 6.13, or 14.64%, to 35.75 after the company reported a 26% jump in sales, excluding the effect of the weak dollar, but fell short of Wall Street earnings expectations by 5 cents per share.
Higher sales did not help Starbucks either. The coffeehouse chain said sales at shops open at least a year rose 7% in January, but analysts surveyed by Thomson First Call had expected the company to post slightly higher growth. Shares of Starbucks skidded 4.43, or 8.2%, to 49.57.
Wall Street’s latest merger trend continued as MCI rose 47 cents to 20.15 after media reports said Qwest Communications could bid for the telecom company, formerly MCI WorldCom. Verizon Communications is also said to be considering a bid for MCI. Qwest climbed 21 cents to 4.41, while Verizon edged 2 cents higher to 35.90.
Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where volume was moderate.
The Russell 2000 index of smaller companies was down 2.66, or 0.42%, at 629.32.
