Market briefing --- Matt (slow)
Nasdaq --- Deb (fast)
Raising interest rates --- Carmen (fast)
welcome to “world financial report.” i’m matt nesto. let’s wrap it up on a friday as we like to do. up day, down week. couldn’t put more simply than that, folks. the dow and s&p both half a percent higher this friday. looking at the nasdaq, red arrow there, down .3%. broader indexes -- bonds up today, down for the week. a similar theme there, as well, with the yield on the 10-year note down to 4.34%. it was recently at 4 .40. and shorter end, similar moves higher. currencies, we go to the dollar buying less yen, the euro and pound both up, dollar weakness across the board. deb kostroun is at the new york stock exchange with the market story. deb, take it away.
>> well, matt, as we’ve been talking about, the market story closely tied to the economic story this week mainly because traders really focusing in on inflation and when interest rates may be rising. earlier this week, concern with a strong retail sales report that interest rates would rise sooner rather than later and today we had comments from the president of the federal reserve in richmond, virginia, saying that the fed really still looking for more signs of strength before moving on interest rates. so that eased concerns, helping out stocks in today’s session. also, those interest rate-sensitive stocks rebounding on the day like banks, also financials and even some of the real estate stocks. also, i.b.m., that was the biggest drag in the dow jones industrial average, also leading tech stocks lower in the s&p 500. another big story on the day was nokia. this is the world’s largest maker of mobile phones, really saying something they have been saying recently, that revenue will fall for a fourth straight quarter, mainly because they are losing market share, continuing to lose market share mainly to samsung. that stock fell to a 13-month low after saying their second-quarter sales going to be slightly changed or slightly below last year’s revenue of $8.4 billion. looking at the move in real estate and interest rate-sensitive stocks. these stocks have been the worst performers since the strong jobs report came out april 3. they’re lower on the concern that interest rates would be rising sooner rather than later. today, as concerns were eased, reits were higher. also the bank stocks and financials getting a good lift. looking at the banks, many of these bank stocks reported earnings this week but so many of the wall street investors really focusing in on the interest rate story. citigroup, that is the first time that stock has been up in about four days. citigroup did report strong earnings, in fact, many of the wall street firms reporting the best first quarter on record. however, we did see more concern about where interest rates were going as opposed to many of the earnings stories we did see. semiconductors, they were the biggest drag in the s&p 500. not only for today but also for the week. tech hardware also another big drag on the day. that was on i.b.m., even though their numbers came in in line with expectations on earnings, the big concern is that they don’t have a lot of things going on for the second quarter that will help out their numbers. in addition, we also saw delta airlines hitting a 52-week low, the third top executive to leave since january. the stock also with earnings this week, things not looking great as crude oil prices coming in and pinching profits. they reported a loss for the quarter once again.
>> thank you very much. as we mentioned at the top of the hour, ernst and young has been barred from accepting new audit clients for six months by an s.e.c. judge. ernst and young’s business venture with audit client peoplesoft violated federal rules designed to preserve the independence of audits. the judge ordered ernst and young pay $1.7 million and required it be overseen by an independent auditor. the firm may appeal the ruling to the s.e.c.’s five commissioners. ernst and young has been underscrutiny for audits of health south, a.o.l. time warner and cendant. ernst agreed to pay $15 million to settle an i.r.s. investigation into the firm’s sale of tax shelters. also today, a judge monitoring worldcom bankruptcy voided two debt-cancelling agreements, plus criticized the company for entering into secret transactions with two of its largest creditors on the eve of of emergence from bankruptcy. the agreements with silver lake partners and maitland patterson global opportunity partners would have created a potential $500 million tax benefit for worldcom. the company plans to exit the biggest bankruptcy in u.s. history this tuesday when it changes its name to m.c.i. bonds up today after consumer confidence and industrial production unexpectedly fell. reports reduced the chances that the federal reserve will raise interest rates this year. carmen roberts joins us now with the details. carmen?
>> you may remember a couple of days ago we were talking about a lot of economists saying the fed may act sooner than expected because inflation was accelerating. now we have data showing the u.s. economy still has pockets of weakness. economists say it may keep the fed on hold through the next quarter. in addition, the president of the federal reserve bank of richmond says he’s not unduly concerned about inflation at this point in the year and alfred broaddus says the job market is showing greater strength, adding momentum to the recovery and that rising energy prices don’t threaten expansion yet. consumers, however, are bothered by higher gasoline prices. the university of michigan says those costs, plus growing violence in iraq, caused consumer confidence to unexpectedly fall this month. the third warmest march weather in 110 years boosted housing starts, the biggest in almost a year, and caused utility production to fall. one economist says it was a surprising drop in utility and mining pulling industrial down because manufacturing was flat.
>> no one anticipated much in terms of industrial production. we knew the auto assemblies were weaker and the aggregate hours worked did not rise. so i don’t think those components were a surprise.
>> the drop in production was the first since may and follows an upwardly revised .8% increase in february. differing with fed president broaddus, some economists say rising gasoline prices and fighting in iraq may have outweighed the effect of the improved economy and jobs outlook. james glassman with j.p. morgan securities says today’s news gives everything a more moderate cast. that’s with the exception of home construction, which he says is in good shape. abn amro’s economist says investors should not be concerned about the reports today.
>> when you look inside the industrial production report, you see what’s happening in terms of investment expenditures which i think will continue throughout the balance of the year showing a broad-based upward movement in demand taking place in the economy.
>> he says the overall level of consumer confidence is still high enough to suggest that consumer spending is sustainable and that’s especially true, matt, with tax rebates coming in.
>> thank you very much. interesting story here, i put together a graph, i was going to talk to you about consumer spending but the reality is i am going to talk to you about the weekly winners and losers. it was an an up day but down week. looking at the five-day winners and losers, interesting story because predominant losers in the marketplace, info tech, utilities and financial, clearly the big drag on the marketplace. if you look at the winners not only for the past five days but also for the year-to-date column, energy at the top there, similar moves for healthcare, also up better than the market averages. also worth a look, if you look at the nasdaq versus the dow versus the s&p 500 month-to-date or quarter-to-date in april, you can see an interesting convergence of the three indexes over the last couple of days. you see now the orange line is the nasdaq, little changed. the dow up almost 1% and the s&p in yellow below that up .75% month to date. there we have it, a look at the market action from a different perspective, as we like to say. stay with us because michael vogelzang is chief investment officer of boston advisers and when we return, he’ll tell us why he’s avoiding tech and what he is buying.
