US stocks closed narrowly mixed Friday after profit reports and forecasts from blue chip names like IBM. and General Electric Co. failed to impress Wall Street and sent investors searching for other catalysts to drive the markets higher.
Profit concerns have unnerved investors already made skittish by the recent tug-of-war over whether stocks will move higher in 2007 with the same resolve as in 2006. Recent weakness in technology stocks had upset Wall Street; tech stocks regained some ground a day after the Nasdaq composite index posted its biggest drop since late November but were still down for the week.
"I think we're at an extremely pivotal psychological level," said T.J. Marta, economic strategist at RBC Capital Markets. He said earnings and economic data support the Federal Reserve's notion that the economy can pull off a soft landing. Marta contends Wall Street is now mulling whether the economy will do a "fly-by" and skip a soft landing entirely with growth continuing apace.
The Fed is unlikely to lower short-term interest rates if the economy continues at a steady clip or if it begins to accelerate again. The central bank has left interest rates unchanged at its last four meetings after a string of 17 straight increases that began in 2004. Last year, investors propelled stocks sharply higher, partly on the widely held view that the Fed would cut rates perhaps as early as the first half of 2007.
The Dow Jones industrial average closed down 2.40, or 0.02 percent, at 12,565.53.
Broader stock indicators were higher. The Standard & Poor's 500 index rose 4.13, or 0.29%, to 1,430.50, and the Nasdaq was up 8.10, or 0.33%, at 2,451.31.
Despite the modest movement in the major indexes, advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 2.84 billion shares, compared with 2.89 billion traded Thursday.
For the week, the Dow industrials rose 0.08%, while the S&P fell 0.02%, and the Nasdaq lost 2.1%.
Bonds fell as stocks tried to further their gains. The yield on the benchmark 10-year Treasury note rose to 4.78% from 4.77% late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Oil settled up $1.51 at $51.99 a barrel on the New York Mercantile Exchange. The increase follows sharp declines in recent sessions and could signal that investors were eager to buy oil to cover previous commitments as they headed into the weekend. The move helped energy companies like Exxon Mobile Corp., which rose $1.57, or 2.2%, to $73.53.
Though the mood on Wall Street might have soured somewhat in the new year, consumers appear to have remained decidedly upbeat. Consumer sentiment, as tracked by a University of Michigan survey, showed a preliminary reading of 98.0 for January compared with 91.7 in December. It is the highest showing since January 2004.
Since the start of 2007, investors have been looking for reasons why the sharp gains stocks enjoyed last year might continue. In 2006, double-digit earnings growth helped propel stocks higher. While many recent fourth-quarter earnings reports have been solid, some forecasts have prompted Wall Street to adopt a more cautious tone. The tepid gains in stocks this year signal investors' concerns about interest rates and the Fed's next move as well as whether profit growth will remain sufficient to push stocks upward.
IBM fell $3.28, or 3.3%, to $96.17 after the company's better-than-expected fourth-quarter profit met with little enthusiasm from investors. Part of the profit increase was due to changes to the company's tax rates. The company's forecast was near the lower end of its growth target of 10% to 12%.
Alcoa Inc. helped offset some of the weakness in the Dow industrials caused by IBM. Alcoa rose $1.10, or 3.6%, to $31.40 after the world's largest aluminum maker said it would repurchase up to 10% of its outstanding shares and increased its annual dividend rate to 68 cents from 60 cents.
GE slid $1.05, or 2.8%, to $36.95 after the conglomerate's first-quarter forecast disappointed some investors. The company also said it plans to restate financial results from 2001 through 2005 and from the first three quarters of 2006 to adjust its accounting for some debt.
Abbott Laboratories closed up 73 cents at $53.52, passing a previous 52-week high of $52.92, after striking a deal to sell a portion of its medical testing business to GE for $8.13 billion.
Citigroup Inc., the No. 1 US bank, rose 11 cents to $54.50 after posting a 26% drop in its fourth-quarter profit. The stock has risen in the last month as the company pledged to bring down costs, but spending concerns resurfaced Friday.
Motorola Inc., which warned in early January that discounts on mobile phones would cut into fourth-quarter profits, posted lower earnings that were nonetheless better than the forecast indicated. The stock advanced 56 cents, or 3%, to $19.27 after it announced plans to cut 3,500 jobs, or about 5 percent of its work force, to reign in costs.
Morgan Stanley rose 29 cents to $81.50 after its real estate arm agreed to acquire CNL Hotel & Resorts Inc., the No. 2 US hotel real-estate investment trust, for $3.13b.
The Russell 2000 index of smaller companies rose 6.95, or 0.89%, to 785.16.
Japan's Nikkei stock closed down 0.35%. Britain's FTSE 100 closed up 0.43%, Germany's DAX index finished up 0.86%, and France's CAC-40 up 1.07%.
The Dow Jones industrials ended the week up 9.45, or 0.08%, to finish at 12,565.53. The S&P 500 index fell 0.23, or 0.02%, to end the week at 1,430.50. The Nasdaq declined 51.51, or 2.06%, to finish the week at 2,451.31.
The Russell 2000 index closed the week down 9.10, or 1.15%, to end at 785.16.
The Dow Jones Wilshire 5000 Composite Index - a free-float weighted index that measures 5,000 US based companies - ended the week at 14,405.79, down 20.21 points from last week. A year ago the index was at 12,939.24.