Stocks finish week up slightly
They fell initially yesterday but picked up steam as investors looked to next week's Fed meeting.
NEW YORK - Wall Street finished a strong week little changed yesterday after investors looked past weaker-than-expected economic readings and focused on the ramifications of the Federal Reserve's decision on interest rates next week.
Stocks initially fell sharply yesterday after release of a government report that August retail sales excluding automobiles declined precipitously. The report suggested that consumers held off spending in the face of turmoil in the financial markets, an unwelcome development that some on Wall Street are hoping could be reversed by a rate cut. Some investors regarded the readings as supporting the case for a rate cut when Fed policymakers meet Tuesday.
Yesterday's session began with unease over the Bank of England's decision to grant emergency funding to lender Northern Rock P.L.C., which was facing a possible liquidity crisis. The need for the bailout unearthed fresh concerns about the fallout from tightness in the credit markets.
The Dow Jones industrial average rose 17.64, or 0.13 percent, to 13,442.52, giving the blue-chip index an advance of 2.5 percent for the week - its best showing since April.
Broader stock indicators likewise showed modest gains yesterday but managed their biggest weekly advances since mid-August. The Standard & Poor's 500 index rose 0.30, or 0.02 percent, to 1,484.25, and the Nasdaq composite index edged up 1.12, or 0.04 percent, to 2,602.18.
For the week, the S&P rose 2.2 percent, while the Nasdaq added 1.4 percent.
Government bond prices finished almost unchanged yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.46 percent from 4.49 percent late Thursday.
Northern Rock's appeal to the Bank of England touched off concerns about the viral nature of problems in the U.S. mortgage market and how long concerns over subprime loans might persist. Britain's FTSE 100 came off its lows but still finished down 1.17 percent.
Denis Amato, chief investment officer at Ancora Advisors, said the Fed must balance concerns about cutting rates to ease some of Wall Street's fears about credit against a need to keep inflation in check and the dollar from continuing to slide.
"Our concern is that the Fed is sort of in a box because, if they cut too fast, they run the risk of weakening the dollar. If we see foreign investors figure the dollar is declining, they might pull their money, in which case the rates go up, not down," Amato said.
If rates decline, investors could take money out of Treasurys and seek higher-yielding assets elsewhere.
The focus on the Fed and other economic issues has led investors to appear little concerned this week by record oil prices. Light, sweet crude fell 99 cents yesterday to settle at $79.10 on the New York Mercantile Exchange. Oil closed above $80 a barrel for the first time Thursday.