RISMedia, Jan. 2 (MCT) – Some surprisingly strong economic news spooked the stock market last Thursday, sending the major indexes into a tumble with one trading day remaining in an otherwise positive 2006. The Dow Jones industrial average posted another intraday high, however, before dropping back to close with a 9-point loss.
News of better-than-expected existing home sales, an increase in Chicago area manufacturing activity and an advance in consumer confidence increased the market's concern that the Federal Reserve will postpone an interest rate cut early next year — a rate cut the market wants.
The economic news also triggered selling in the highly sensitive bond market for the same reason. That had the effect of lifting the benchmark 10-year Treasury yield — which moves opposite to price — to a seven-week high of 4.69 percent.
Wachovia senior economist Mark Vitner said the economic reports made any lingering recession worries obsolete.
"Consumers are clearly more comfortable with the current economic environment," he said. "1/8The3/8 housing market and motor vehicle industry appear to be leveling off at a pace that does not threaten the broader economic expansion."
Thursday's selling in light trading put a dent in the market's mythical "Santa Claus rally," which got off to a good start in a holiday-shortened week. According to the Stock Trader's Almanac, stock indexes traditionally gain as much as 1.5 percent to 1.6 percent over the last five trading days in December plus the first two sessions in January.
Apple Computer fell 0.7 percent in Thursday's trading after a Financial Times report that Chief Executive Steve Jobs received stock options in 2001 that were not authorized by the board. Jobs later surrendered the options before they were exercised, the newspaper reported.
Copyright © 2006, The Atlanta Journal-Constitution
