Wall Street Edges Higher, Shakes Off Credit Fears (CNA)

Source : Channel NewsAsia, 15 September 2007

NEW YORK - US stocks eked out small gains Friday, as generally positive reports on retail sales and consumer sentiment helped the market shake off renewed worries about a widening of the credit crunch.

The Dow Jones Industrial Average closed up 17.64 points (0.13 percent) at 13,442.52, recovering from a loss of nearly 100 points at the opening.

The tech-heavy Nasdaq added 1.12 points (0.04 percent) to end at 2,602.18 and the Standard & Poor's 500 broad-market index rose a fractional 0.30 points (0.02 percent) to 1,484.25.

The weak opening came on news that British mortgage lender Northern Rock sought emergency funding, raising concerns that the credit squeeze is not over and may be widening.

The market steadied as it digested a number of economic reports, including on US retail sales, industrial production and consumer sentiment. These showed generally soft conditions but not as bad as some had feared.

"The consumer confidence report took attention away from credit concerns as the Bank of England bailed out a British lender to ease a liquidity squeeze," said Al Goldman, chief market strategist at AG Edwards.

The University of Michigan consumer sentiment index rose slightly to 83.8 points, roughly in line with forecasts.

David Rodriguez at Forex Capital Markets said the figure was "hardly impressive," but nonetheless "reinforces the view that consumers remain thus far unaffected by credit and real estate market troubles."

"Consumer confidence numbers leaves scope for robust consumer spending through the medium term, which would undoubtedly boost the broader economy in the face of a housing recession," he said.

The Commerce Department meanwhile reported retail sales rose a weaker-than-expected 0.3 percent in August, suggesting US consumers are turning cautious in the face of housing and credit woes. Excluding volatile auto sales, the report showed a 0.4 percent decline.

Although this report was seen as soft as well, Charmaine Buskas at TD Securities said it "is probably good news to markets worried about fallout from the recent financial market jitters on the consumer."

The market was looking ahead to Tuesday's Federal Open Market Committee meeting, with the central bank widely expected to cut its base rate of 5.25 percent in the face of credit and housing market stress. Most analysts say the Fed will decide between a cut of 25 or 50 basis points.

Buskas said the Fed would regard the key retail sales report "positively."

"This builds the case for the Fed to act judiciously and cut rates only 25 basis points at next Tuesday's meeting," she added.

Among stocks in focus, General Motors climbed 2.77 percent to 34.22 dollars, building on gains of 10 percent on Thursday on hopes for labor concessions from the United Auto Workers union.

McDonald's, another big blue-chip gainer a day earlier, advanced 2.12 percent to 55.45, keeping momentum after its decision to raise its dividend by 50 percent.

Countrywide Financial rose 2.59 percent to 19.42, as investors dismissed the impact of the British credit problems on the US mortgage group, which on Thursday said it had secured 12 billion dollars in new credit.

Intel fell 1.66 percent to 24.93 dollars and American Express shed 2.74 percent to 58.94 on broker downgrades by Merrill Lynch.

Bonds firmed in a renewed flight to safety. Yields on the 10-year US Treasury bond dipped to 4.462 percent from 4.482 percent Thursday while the 30-year bond yielded 4.724 percent, from 4.743 percent. Bond yields and prices move in opposite directions.

- AFP /ls