Wall Street finished the week slightly lower, as investors reacted to signs of economic slowdown while bracing themselves for rate rises at next week’s meeting of the Federal Reserve’s open market committee.
Large-cap stocks on the Dow Jones Industrial Average are now beating the year-to-date performance of smaller cap stocks on the Russell 2000.
Consolidation in the energy sector was the catalyst for the week’s biggest moves. Kerr McGee, based in Houston, soared 33.7 per cent to $68.61, and Western Gas Resources jumped 41.5 per cent to $59.67 after Anadarko Petroleum announced it was buying the two companies for a combined total of $21.1bn. Anadarko fell
6.9 per cent to $44.90.
The exchanges sector remained active. NYSE Group gained 11.6 per cent to $61.45, its best performance since the week the stock began trading in March. On Tuesday, Euronext said a slightly modified offer from Deutsche Börse gave nothing that was substantially new and still recommended NYSE’s offer to its shareholders.
Qualcomm fell following Nokia’s announcement that it was pulling out of a joint venture with Sanyo for handsets based on the CDMA standard. Qualcomm owns many of the patents related to CDMA. Shares finished the week down 10.1 per cent at $39.50.
General Motors had another good week, buoyed by news that its largest parts supplier, Delphi, had reached a deal with one of its unions for employee buyouts. GM gained 5.4 per cent to $26.97 for the week.
Shares in software maker Novell rose 13.1 per cent to $6.66 after it announced the departure of two of its top executives. Analysts largely welcomed the management shake-up, interpreting it as a sign of aggressiveness on the part of the company to reverse losses that had dragged shares down more than 25 per cent since May.
Investment banks gained, with the S&P investment banking index up 2.5 per cent, having fallen the previous week.
Morgan Stanley led, adding 4.8 per cent to $59.70 for the week, after it reported a doubling in second quarter profits.
At the close on Friday, the S&P 500 was flat, down 1.10 points, at 1,244.50 and 0.6 per cent lower for the week. The Nasdaq was also flat, down 1.51 points, leaving it down 0.4 per cent for the week at 2,121.47. The Dow Jones Industrial Average was down 0.3 per cent, or 30.02 points, at 10,989.09, a loss of 0.2 per cent for the week.
The Vix, a measure of stock market volatility, dropped this week but remained at its highest levels of the past three years.
The Index of Leading Economic Indicators and figures for durable goods orders both fell in May – further evidence that economic growth in the US is slowing.
Marc Pado, chief market strategist at Cantor Fitzgerald, attributes the market’s dip to fears of an economic slowdown.
The Dow is up 2.5 per cent for the year, ahead of the Russell 2000 index of smaller companies, which is up only 2.4 per cent.
“In the last six weeks we have definitely seen a flight to safety, in the blue chips and more specifically in the defensive members of the Dow,” said Mr Pado.
Univision, the Spanish language broadcaster, slid 7.8 per cent to $32.95. Two consortia had been squaring off to bid for the network, but during the week, private equity groups Blackstone, Carlyle and Kohlberg Kravis Roberts dropped out of the consortium led by Mexico’s Televisa.
Boston Scientific fell 9.1 per cent to $18.26 after reports suggested that hospitals were reducing the use of its stents, devices inserted into arteries to keep them open.
Construction and chemicals group Ashland leapt 8.4 per cent to $66.95 after Irish construction group CRH said it was in talks to buy the company’s asphalt and construction units.
Oracle gained 5 per cent to $14.90 after reporting a 27 per cent rise in fiscal fourth quarter profit, just ahead of analyst expectations. The software maker also ann-ounced plans to expand its share buyback programme.
The ongoing fallout from stock options investigations pushed Jabil Circuit down
4.8 per cent to $25.00 after it said it had received a subpoena in connection with its stock option granting practices. It has fallen more than 40 per cent since the beginning of April.
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