Viacom sends Dow down
23/02/2006 - 22:15:40Wall Street slid lower today, with inflation concerns and a disappointing earnings report from media conglomerate Viacom prompting investors to collect profits. A drop in oil prices failed to mitigate the losses.
US investors were unnerved as the latest unemployment figures showed strength in the labour market. First-time jobless claims fell by 20,000 from the previous week to 278,000 – a far sharper drop than economists had expected.
While a strong labour market is generally good news, Wall Street remains concerned that the additional buying power that comes with steady employment could push prices higher and spark inflation, prompting the Federal Reserve to keep hiking interest rates.
Investors were at the drop in oil prices, which fell below 60 dollars per barrel at one point after the Energy Department reported a rise in crude oil stockpiles. A barrel of light crude settled at 60.54 dollars , down 47 cents, on the New York Mercantile Exchange.
“Certainly the move in oil is good, and the market certainly perked up somewhat after that inventory report,” said Peter Cardillo, chief strategist and senior vice president at SW Bach & Co. “For the intermediate term, there doesn’t seem to be a supply/demand problem out there. But you don’t know when that’ll change.”
The Dow Jones industrial average fell 67.95, or 0.61%, to 11,069.22.
Broader stock indicators also fell. The Standard & Poor’s 500 index lost 4.88, or 0.38%, to 1,287.79, and the Nasdaq composite index dropped 3.85, or 0.17%, to 2,279.32.
Bonds fell, with the yield on the 10-year Treasury note climbing to 4.56% from 4.53% on Wednesday. The dollar was mixed against most major currencies, while gold prices rose.
Stocks jumped to fresh 4-year highs over the past few weeks as strength in the US economy encouraged investors. Yet concerns remain, including whether the Federal Reserve’s interest rate hikes will cut off economic growth. With little news today to keep momentum alive and uncertainty about the state of the economy later in the year, profit-taking ate into the rally.
“It’s very difficult for investors to extrapolate anything from these short-term moves in the market,” said Christopher Conkey, chief investment officer at Evergreen Investments. “Don’t get too excited about days like yesterday, and don’t get too excited about days like today, either.”
In its first earnings report since spinning off CBS, Viacom said its fourth-quarter profits fell due to poor performance at its Paramount movie studio arm as well as one-time charges related to the company’s reorganisation. Viacom fell 96 cents to 41.
Home builder Toll Brothers rose 1.05 to 33.54 after the company said fourth-quarter profits jumped 49% and that its backlog of building projects rose 22% by the end of the quarter. However, the number of new contracts fell 21%, raising new concerns about a softening housing market.
Clothing retailer Limited Brands said its fourth-quarter earnings climbed 36% on strong sales at its Victoria’s Secret stores and a continuing turnaround at its Express stores. Limited Brands, which beat Wall Street forecasts by 4 cents per share, added 68 cents, or 2.9%, to close at 24.09.
Mortgage broker Fannie Mae jumped 1.23 to 57.14 after investigators implicated the company’s former chief executive and chief financial officer for its 11 billion accounting scandal. Investors showed relief that no current executives were named in the investigation.
Declining issues outnumbered advancers by more than 9 to 7 on the New York Stock Exchange, where volume came to 1.58 billion shares, compared with 1.62 billion at the same point on Wednesday.
The Russell 2000 index of smaller companies rose 1.57, or 0.21%, to 735.10.
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