Stocks end mixed on economic woes
Wall Street close mostly down as investors bet lower oil prices and weak Fed report reflect slower global demand. But Dow manages gains on banks and GM.
NEW YORK (CNNMoney.com) -- Stocks ended mixed Wednesday in a choppy session, as falling oil prices, a lackluster growth report from the Federal Reserve and weak sales from many automakers kept worries about the economic slowdown in the forefront.
A stronger-than-expected factory orders report failed to soothe investors nervous about the economic outlook. General Motors' smaller-than-expected sales decline was a rare bright spot for the industry, hit by slowing sales.
The Dow Jones industrial average (INDU) added a few points thanks to GM, Home Depot and financial components such as AIG (AIG, Fortune 500).
The broader Standard & Poor's 500 (SPX) index lost 0.2%. The Nasdaq composite (COMP) lost 0.7%.
"With oil and all the commodities down over the last few days, you would think this would be one big party for the market," said Greg Church, president of Church Capital. "But there are fears about a recession and the decline in oil prices is adding to those fears."
He said that Wednesday's news of the collapse of a commodities hedge fund added to such concerns.
Investors welcomed a report showing a bigger-than-expected rise in factory orders in July. But that was countered by a weak "beige book" reading on economic activity, released by the Fed in the afternoon.
General Motors (GM, Fortune 500) reported that North American sales fell 20.4% in August versus forecasts for a decline of 29%. Shares gained 6%. Other automakers reported worse-than-expected results, including Ford (F, Fortune 500), which said sales fell almost 27% versus a year ago. (Full story)
Big technology issues were among the decliners, including Intel (INTC, Fortune 500), Applied Materials (AMAT, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500).
Thursday's big news of note will be the August retail sales figures from the nation's chain stores, said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.
"That will be the first time the retailers are going to report sales without the stimulus checks," he said. The sales figures should provide a better sense of how much pressure the consumer is under.
Also due Thursday: weekly jobless claims, weekly crude supplies, the revised reading on second-quarter productivity and the Institute for Supply Management's reading on the services side of the economy.
Fuel prices: U.S. light crude oil for October delivery fell 36 cents to settle at $109.35 a barrel, the lowest level since April 7, after tumbling $5.75 a barrel Tuesday.
Oil has risen steadily over the last few weeks after tumbling more than 20% off the record high of $147.20 a barrel hit on July 11. The threat of Gustav and other storms had driven prices even higher last week as investors tried to assess the impact it might have on the Gulf Coast. Facilities in the area are responsible for roughly 25% of U.S. oil production.
However, Gustav's impact was seen as less devastating than might have been expected and oil prices began slipping anew. (Full story).
Analysts at Goldman Sachs are forecasting that crude prices will set new records at around $149 per barrel by the end of the year, due to fundamentals in the oil market.
Gas prices continued to decline overnight. But analysts say that may change in the weeks ahead as the damage to facilities is better understood.
Economic news: July factory orders rose 1.3%, the government reported, after climbing an upwardly revised 2.1% in June. The advance was due partly to a jump in aircraft orders. Economists surveyed by Briefing.com thought orders would rise 1% in the month.
While that report was encouraging, it was countered by the afternoon release of the Fed's semi-annual beige book, which showed that the pace of economic activity has been slow in most of the 12 districts. Consumer spending has been sluggish as well.
Earlier in the day, Boston Federal Reserve Bank president Eric Rosengren said the credit crunch was worse than the one seen in the early 1990's and that it could serve to push the unemployment rate up to 6%.
Company news. Ambac Financial (ABK) rallied 22% in active New York Stock Exchange trade on signs that it is making progress in rebuilding its struggling business. The bond insurer said it received Wisconsin regulatory approval for a subsidiary to insure municipal bonds.
Lehman Brothers (LEH, Fortune 500) inched higher on reports that Korea Development Bank has offered to buy a 25% stake in the troubled financial services firm for as much as $5.3 billion. However, KDB said Wednesday that a deal was still up in the air. HSBC and Tokyo Mitsubishi have also been mentioned as potential suitors.
In other Lehman news, a commodities hedge fund that the company has a 20% stake in will close down after losing 27% in August. (Full story).
Shares of Corning (GLW, Fortune 500) fell 9.5% after the company warned that third-quarter sales and earnings won't meet forecasts due to weaker shipments of its glass used in flat-screen televisions and computers.
Staples (SPLS, Fortune 500) reported weaker quarterly earnings that were in line with forecasts. Shares of the office supply retailer rose 1%.
Coca-Cola said it will buy Chinese juice maker China Huiyuan Juice Group Ltd. in a $2.5 billion all-cash deal. Coke (KO, Fortune 500) shares were little changed.
Home Depot (HD, Fortune 500) rose 3.5% after reportedly saying on a Goldman Sachs retailing conference call that although the housing market crisis has not bottomed, the bottom is within sight.
Market breadth was positive. On the New York Stock Exchange, losers beat winners eight to seven on volume of 1.21 billion shares. On the Nasdaq, decliners narrowly edged advancers on volume of 2.16 billion shares.
Other markets: In global trade, Asian and European markets ended lower.
In the bond market, Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.69% from 3.73% late Tuesday. Prices and yields move in opposite directions.
The dollar gained modestly versus both the euro and the yen.
COMEX gold for December delivery fell $2.30 to settle at $808.20 an ounce after plunging nearly $25 in the previous session. 
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