About three stocks declined for every two that rose on the New York Stock Exchange. The Nasdaq Composite Index fell 2.65, or 0.1 percent, to 2,668.49. The Dow increased 44.06, or 0.3 percent, to 13,517.96, led by a 5 percent advance in Honeywell International Inc. The S&P 500 added 1.82, or 0.1 percent, to 1,488.41. Benchmarks in Asia and Europe slumped.
“Doing other things to inject liquidity really doesn’t address the issue of broader economic weakness,” said David Joy, who helps oversee $161 billion as chief market strategist for Riversource Investments LLC in Minneapolis. With financials, “it’s too early to step up and take a stand that these stocks are undervalued. If you dip your toe in the water, you could still get burned.”
Small Caps, Retailers Slump
Smaller companies led the market lower, with the Russell 2000 Index, a benchmark for shares with a median market value of $598 million, falling 0.3 percent. The NYSE Composite Index of all common shares on the New York Stock Exchange lost 0.6 percent.
A gauge of chain stores declined 1.1 percent, led by Home Depot Inc. and Target Corp., after a report showing the biggest surge in wholesale inflation in 34 years overshadowed a stronger-than-expected report on retail sales.
Goldman, the largest securities firm, lost $4.10 to $208.48. Merrill, the third-largest, slumped 98 cents to $57.83. Bear Stearns, the second-biggest U.S. mortgage-bond underwriter, dropped $2.45 to $98.39.
Lehman Brothers lost 45 cents to $61.37. The largest U.S. underwriter of mortgage bonds said fourth-quarter investment banking revenue fell 3 percent to $831 million and fixed-income capital markets revenue declined. Net income fell 12 percent to $886 million.
`A Lot of Uncertainty’
“There will be a lot of people looking at their report to try to gain some insight into what might happen down the road with other brokerages and banks,” said Ed Laux, head of U.S. trading at Cantor Fitzgerald & Co. in New York. “There’s still a lot of uncertainty and worry about valuations in the financial sector.”
Financial shares also fell after the cost of borrowing euros stayed at the highest since December 2000, signaling the plan by the Federal Reserve and four other central banks to inject funds into the financial system isn’t lowering borrowing costs and boosting lending.
Washington Mutual fell 47 cents to $15.59. The biggest U.S. savings and loan was cut to “sell” from “neutral” at Bank of America Corp. on concern credit quality may deteriorate further and it may have to raise funds. The brokerage also reduced its price estimate on the stock by 46 percent to $13.
Countrywide Financial Corp., the biggest U.S. mortgage company, lost 45 cents to $10.08. American International Group Inc., the largest insurer, slumped $1.16 to $57.05.
Financial companies in the S&P 500 are expected to report a 36 percent average profit drop in the fourth quarter, the worst performance among 10 industries, according to a Dec. 7 Bloomberg survey.
Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, climbed the most among companies in the S&P 500. Freddie Mac should have more than enough capital to weather “challenging” conditions in 2008 as tighter underwriting and guarantee-fee increases boost profit, analysts at Bear Stearns said after meeting with Freddie Mac Chief Financial Officer Anthony Piszel. Fannie Mae gained $2.64 to $34.76 and Freddie Mac climbed $2.29 to $32.46.
Target, the second-largest U.S. discount chain, fell 68 cents to $52.50 and Home Depot, the largest home-improvement retailer, dropped 85 cents to $27.64.
Prices paid to U.S. producers climbed twice as much as economists had forecast in November, pushed up by surging costs for fuel. Excluding food and energy, prices rose the most since February.
Retail sales in the U.S. increased twice as much as forecast in November. The 1.2 percent increase, the biggest since May, followed a 0.2 percent gain the prior month, the Commerce Department said. Purchases excluding automobiles jumped 1.8 percent, the most since January 2006.
Costco Wholesale Corp., the largest U.S. chain of wholesale-warehouse stores, fell the most in more than two weeks on earnings that failed to top analysts’ estimates. Costco slid $1.65 to $68.54. Net income was 59 cents a share in the first quarter, matching projections of analysts surveyed by Bloomberg.
SOME HEAVEY MOVERS ON THE STOCK EXCHANGE TODAY
Bear Stearns Cos. (BSC US)Biogen Idec Inc. (BIIB US)
Ciena Corp. (CIEN US)
Costco Wholesale Corp. (COST US)Countrywide Financial Corp. (CFC US)
Dow Chemical Co. (DOW US)
Fannie Mae (FNM US)
Freddie Mac (FRE US)
Goldman Sachs Group Inc. (GS US)Home Depot Inc. (HD US)
Honeywell International Inc. (HON US)
Lehman Brothers Holdings Inc. (LEH US)
Merrill Lynch & Co. (MER US)Qualcomm Inc. (QCOM US)
Target Corp. (TGT US)
Washington Mutual Inc. (WM US)
Biogen Idec Inc. slumped $17.97, or 24 percent, to $57.91, its steepest loss since February 2005. The maker of drugs for cancer and multiple sclerosis said it will no longer pursue a sale. The biotechnology company put itself up for sale in October after billionaire investor Carl Icahn bid $23 billion.
Qualcomm Inc., the second-biggest maker of chips that run mobile phones, dropped $1.15 to $39.86 after Nokia Oyj won the first round of a patent fight. Administrative Law Judge Paul Luckern in Washington rejected Qualcomm claims that Nokia, the world’s biggest maker of mobile phones, infringed patents for a technology that prevents dropped calls. He also said one of the three patents is invalid. The decision is subject to review.
Ciena Corp. fell $5.08, or 12 percent, to $37.04. The maker of network equipment forecast revenue for the current fiscal year will be $935.7 million, less than the average estimate of $949.2 million in a Bloomberg survey of analysts.
Dow Chemical Co. surged $2.64 to $44.39 after the largest U.S. chemical maker and Kuwait’s Petrochemical Industries Co. said they will form a joint venture to make plastics and chemicals.
Honeywell International Inc. climbed $2.91 to $60.65, the steepest gain in the Dow average and its biggest advance in almost five years. The world’s largest maker of aircraft controls forecast higher 2008 profit as demand for plane parts and overseas sales of thermostats and security systems help overcome a U.S. housing slump.