Wall St lower on further evidence of slowdow

Wall St lower on further evidence of slowdown
By John O’Doherty in New York
Copyright The Financial Times Limited 2006
Published: September 22 2006 13:37 | Last updated: September 22 2006 21:48


Wall Street finished the week lower on Friday, as investor relief over the Federal Reserve’s decision to leave interest rates unchanged was countered by fresh evidence of slowing economic growth.

Large-cap technology stocks made some of the most dramatic moves during the week. Yahoo slumped 13 per cent over the five days to $25.52, wiping out the previous eight weeks of gains. The company said third-quarter results would be at the bottom end of their previously forecast range due to slowing advertising revenue.

Oracle provided a counterweight to Yahoo’s slump, climbing 7.4 per cent to $17.54. On Wednesday, the software maker reported a 29 per cent increase in first quarter profits, as its chief executive said the company was gaining market share from German rival SAP.

Hewlett-Packard shed 3 per cent to $35.11 over the week as its controversial investigation into boardroom leaks to the media began to unnerve investors. News reports said that chief executive Mark Hurd may have had a greater role in the investigation than had previously been thought.

Microsoft dipped 0.7 per cent to $26.66. However, the stock has now gained 25 per cent since the middle of June and is back in positive territory for the year.

Media group Tribune, owner of the Los Angeles Times, surged 9.8 per cent to $33.99, its best week in more than two years, after it appointed a special committee to oversee a business review that might lead to a sale of some assets or a leveraged buyout of the group.

At the close, the S&P 500 was down 0.4 per cent for the week at 1,314.78, a loss on the day of 0.3 per cent, or 3.25 points. On Wednesday, the index briefly hit its highest level in more than five years. The Nasdaq Composite was 0.7 per cent lower on the week, losing 0.8 per cent, or 18.82 points, on the day to 2,218.93.

The Dow Jones Industrial Average finished the week down 0.5 per cent, a loss of 0.2 per cent, or 25.13 points, on the day at 11,508.10.

Stocks made a brief rally on Wednesday after the Federal Reserve left interest rates unchanged at 5.25 per cent. However, on Thursday the Philadelphia Federal Reserve’s manufacturing index fell sharply, increasing investor unease that economic growth was slowing faster than had been thought.

“The run-up to this point has been driven by an expectation that the Fed will stop raising rates and get the cooling in the economy they’re looking for,” said Joseph Battipaglia, chief market strategist at Ryan Beck.

“The price you’re paying for that is uncertainty about how much softening there will be in the economy. A soft landing is something that the Fed cannot engineer. It’s out of their hands.”

Fears of a slowdown in manufacturing affected Caterpillar, which sank 4.1 per cent to $62.77 – the week’s worst performance in the Dow. United Technologies, also suffered, losing 3.6 per cent to $62.30.

General Motors tumbled 3.3 per cent to $30.62 on reports that talks on a possible alliance with Nissan and Renault had made little progress.

Symbol Technologies, a maker of barcode scanners and mobile computers, surged 15.2 per cent to $14.64 after Motorola agreed to buy the company for $3.9bn.

Darden Restaurants leapt 9.3 per cent to $42.38 after its first quarter profits beat analyst estimates and it raised earnings guidance for 2006 on bullish forecasts for revenue from its Olive Garden chain of Italian-themed restaurants.

Home improvement retailer Home Depot suffered from the slowing housing market, sinking 3.4 per cent to $35.96. The stock has fallen 11 per cent since the beginning of the year.

Medical device maker Boston Scientific reported preliminary sales and earnings figures for the third quarter that came in below analyst estimates. Morgan Stanley cut its rating on the stock from “overweight” to “underweight”, and the shares tumbled 8.5 per cent to $14.85.

First Data, provider of electronic payment systems, sank 9.3 per cent to $40.49. Early in the week, its Western Union subsidiary – which the company plans to spin off – said income growth would be sluggish in coming years, as immigrants who use the service to send money to relatives grow concerned about government scrutiny of wire transfers.