Profit-taking ended Wall Street’s recent streak of strong gains on Friday. The leading indices closed mixed after trading lower for most of the day, capping a week that saw US stocks notch their best five-day performance this year.
The Dow Jones Industrial Average slipped 21.28 points, or 0.2 per cent, to 10,471.91. The S&P 500 fell 1.80 points, or 0.2 per cent, to 1,189.28. The Nasdaq Composite rose 3.84 points, or 0.2 per cent, to 2,046.
But for the week, the Dow rose 3.3 per cent, the S&P 500 notched a gain of 3.1 per cent and the Nasdaq Composite jumped 3.6 per cent – its best weekly performance since August and the best showing by the Dow and the S&P since November.
Positive economic news, a flurry of merger activity, and easing fears about the prospect of a trade war with China calmed investors, who have been battered by several weeks of wild swings on the stock market.
Record corporate earnings and an upturn in corporate buying have led many bulls to argue that the recent downward trend on Wall Street is nothing but a “soft patch”, and that valuations remain attractive in spite of the 32 month-old bull market.
But bearish voices warn that the market might not yet have seen the bottom of its most recent correction.
Strong results from two hardware chains put a spark into trading early in the week after Lowe’s and Home Depot weighed in with higher quarterly profits. Lowe’s rose 8.7 per cent for the week after a gain of 5.6 per cent on Monday. Home Depot, Lowe’s biggest US rival, followed suit on Tuesday with profits up 14 per cent. Its shares rose 9.2 per cent for the week.
Morgan Stanley investors brushed off a court decision to award Ronald Perelman, an aggrieved billionaire, $1.5bn in damages. Shares in Morgan Stanley ended the week 3.7 per cent higher.
Stocks rallied in late trading on Tuesday after the US Treasury increased the pressure on China to revalue the renminbi. The government stopped short of accusing Beijing of currency manipulation, easing fears that protectionist sentiment in Congress could spark a trade war.
Computer makers stole the show on Wednesday after Hewlett-Packard reported higher profits. HP shares rose 9.1 per cent for the week. Gateway, a rival computer maker, jumped 7.7 per cent. Although a new $45m contract to supply computers to the University of Arizona appeared to spark the move, there was some speculation that investors were moving to cover short positions on the stock amid rumours that Bailey Coates, a hedge fund, had liquidated its holdings in the company.
A bleak sales outlook from Corning, the biggest maker of glass for use in computer screens and other digital equipment, helped keep gains in check. Shares in the group fell 2.7 per cent for the week after it warned that sales growth could be weaker than first thought.
Energy stocks led the way on Thursday as bargain-hunters swooped following the sector’s recent losing streak. ExxonMobil, the biggest US oil producer, edged up 0.6 per cent this week to $54.01 after it agreed to sell some west Texas gas interests to a rival. Valero Energy, the oil and gas explorer, rose 5.4 per cent to $65.19.
A flurry of mergers and acquisitions kept traders busy throughout the week.
UPS, the express shipper, agreed to buy Overnite Transportation, the trucking concern, for $1.3bn in cash, sending Overnite shares up 43.8 per cent on Monday and 44.2 per cent for the week. UPS shares were up 3.9 per cent on the week by mid-session.
Titan, the defence group, rose 7.6 per cent on Thursday and 16 per cent for the week after it agreed to be acquired by L-3 Communications, a rival. L-3 shares rose 7.3 per cent for the week.
Late on Thursday, America West, the US regional airline, secured $1.5bn in new financing to merge with US Airways, a bankrupt rival. America West shares rose 26.4 per cent for the week.
Maytag shares soared 33 per cent after the appliance group agreed to be acquired by a group of private investors for $2.1bn.
