NEW YORK (CNN/Money) -
The Dow industrials broke a two-session winning streak Thursday, losing steam on weak drug stocks, a declining dollar and more geopolitical concerns, while the Nasdaq composite closed little changed.
The Dow Jones industrial average (down 50.74 to 8538.40, Charts) and Standard & Poor's 500 index (down 3.38 to 901.58, Charts) closed lower, while the Nasdaq composite (up 2.96 to 1399.55, Charts) hovered near breakeven.
Friday brings economic reports on business inventories, consumer prices and the preliminary December reading of consumer confidence from the University of Michigan.
The dollar lost more than a percent against the euro Thursday, even though it was only modestly lower against the yen. Light crude oil futures added 61 cents to $28.01, partly on news that OPEC will cut production.
Gold rose nearly $7, topping the $330 an ounce mark as investors feared the impact of a potential war with Iraq and grew more concerned about brewing tensions between the United States and North Korea.
"Gold is at a high and the dollar weakened again. As a result, you would think stocks would be a lot lower today, with people putting money into those areas and taking money out of stocks, but they're not that bad. We're kind of just drifting," said Donald Selkin, director of research at Joseph Stevens. "The Dow has its own company-specific problems, but the Nasdaq is hanging in there."
The Dow had closed higher for eight weeks in a row from October through early December, while the Nasdaq and S&P 500 had closed higher for three weeks, before all three indexes closed lower last week. This week, markets have shifted in volatile trade.
"We're getting to the year-end period and stocks are starting to drift. But the pullback so far has been orderly," said John Hughes, market analyst at Shields & Co.
"There's still a lot of uncertainty about the economy and about the change in [President] Bush's economic team. We're also coming off a period where the Dow rose for eight weeks and so you're seeing a little pullback. You saw it last week, and I think it's continuing."
Drug stocks slide
"The market has a more negative tone to it, and drug stocks in particular are seeing declines on a mixture of news and traders rotating money out of the sector and into other stocks," said Neil Sweig, a pharmaceuticals analyst at Fulcrum Global Partners.
Bristol-Myers Squibb (BMY: down $1.80 to $25.35, Research, Estimates) was among the stocks leading the drug sector lower after a Wall Street Journal report questioned some of the company's accounting practices.
Pharmaceutical maker Merck (MRK: down $1.23 to $57.16, Research, Estimates), a Dow component, declined partly as a result of analyst and investor speculation that the company's recently rosy forecast on its quarter may not be realistic, Fulcrum's Sweig said.
He said another Dow drug stock, Johnson & Johnson (JNJ: down $1.12 to $55.05, Research, Estimates), may have been suffering in relation to Amgen (AMGN: up $3.18 to $50.45, Research, Estimates), the world's largest biotech firm. Amgen gained after the company raised estimates for fiscal 2002 and 2003 during its mid-quarter update, citing some of its newly approved and acquired products.
Amgen's improved forecast comes partly from strong sales of its anemia drug, the company said. Johnson & Johnson markets a rival anemia drug and some investors may have been bailing on the stock as a result of that, Fulcrum's Sweig said.
Shares of Coca-Cola (KO: down $0.88 to $45.87, Research, Estimates) slid a day ahead of its analysts meeting, pressuring the Dow. Late Wednesday, the company named Steven Heyer its new president and chief operating officer. Heyer is a relative newcomer to the company.
The Nasdaq drifted, with strength in biotech, telecom and networking countered by weakness in chips and software.
Telecom gear maker Ciena (CIEN: up $1.03 to $6.21, Research, Estimates) was a bright spot. The company posted a smaller fourth-quarter loss and higher revenue than analysts expected and also raised its forecast for current-quarter revenue. The stock rallied and was among the most actively traded Nasdaq issues.
Retail sales rise
Stocks also gathered some support from a report showing strong retail sales figures in November, reassuring investors that consumer spending continues to hold up. The report is particularly important as it covers the first month of the key holiday sales period, when retailers make a large chunk of their sales for the year.
Retail sales rose 0.4 percent in November, in line with the consensus estimate of analysts surveyed by Briefing.com. Excluding auto sales, "core" sales rose 0.5 percent, better than the expected 0.2 percent rise.
But countering that was a report showing that the number of Americans filing new claims for unemployment rose last week to 441,000 from a revised 358,000 the preceding week, the Labor Department said; economists had expected a much smaller rise. However, the government said there were unusual factors related to the big bump.
The report follows the worse-than-expected monthly jobs report last Friday, confirming that a pickup in jobs continues to lag any economic recovery.
Treasury prices rose a little, sending the 10-year note yield down to 4 percent.
Market breadth was negative. On the New York Stock Exchange, advancers edged decliners 8 to 7 as 1.22 billion shares changed hands. On the Nasdaq, losers and winners were nearly evenly split as 1.38 billion shares traded.
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