three cheers for the green dow , page-8

bulls lose momentum Bulls lose momentum
Stocks broadly lower, ending two-day runup, as interest rate fears resurface; Dow ends flat.
By Steve Hargreaves, CNNMoney.com staff writer
June 16, 2006: 4:52 PM EDT


NEW YORK (CNNMoney.com) - Stocks couldn't sustain a two-day-old rally Friday, as investor concerns about Federal Reserve interest rate activity reawakened, but the Dow Jones industrial average was virtually unchanged and remained above the 11,000 mark.

The Dow (down 0.64 to 11,014.55, Charts) ended the day down less than a point, but the Nasdaq composite (down 14.20 to 2,129.95, Charts) lost 0.7 percent and the broader Standard & Poor's 500 index (down 4.62 to 1,251.54, Charts) fell 0.4 percent.





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The Dow ended the week up 1.1 percent, while the Nasdaq fell 0.2 percent and the S&P was flat.

The markets were coming off a couple of strong advances that had ended a lengthy stock slide. On Thursday, the Dow posted its biggest point and percentage gain in over a year, while the Nasdaq and S&P had their biggest point gains in three years.

"We had such a strong day yesterday, a flat market is a positive reaction," said Barbara Marcin, a fund manager at Gamco. "But we're still worrying that the Federal Reserve will overshoot the mark."

Fed Gov. Donald Kohn brought inflation back front and center during a discussion Friday.

"Inflation expectations have come a little bit unhinged - it's not a lot, it's not a big deal, but it has presented us with some issues," Kohn said during a panel discussion at a Boston Fed conference on global imbalances, according to Reuters.

He also said globalization helped diffuse risks of rising interest rates but also said it might make inflation harder to contain if it ever got out of control.

In an economic report issued Friday, the University of Michigan said consumer sentiment rose unexpectedly in June, but the news did little to move markets.

Also affecting markets was the quadruple witching options expiration, along with news from the software sector late Thursday.

Microsoft Chairman Bill Gates made a surprise announcement Thursday that he would be leaving day-to-day responsibilities at the company in two years to concentrate on his charitable foundation, while Oracle said its fiscal fourth quarter earnings and sales beat its earlier guidance. Oracle (up $0.49 to $14.19, Charts) shares rose over 4 percent while Microsoft (up $0.03 to $22.10, Charts) gained slightly.

In other corporate news, cruise ship operator Carnival (up $2.02 to $40.19, Charts) said higher fuel costs ate into quarterly profit. But the company said discounted tickets should lead to increased bookings, and shares rose 5 percent.

Home builder KB Home (up $0.37 to $45.47, Charts) reported better than expected second quarter earnings after the market close Thursday, but it lowered its guidance for 2006 due to the slowing housing market.

Traders will look forward to a week with several economic reports, including housing starts and durable goods.

Thursday's rally
Federal Reserve Chairman Ben Bernanke said Thursday inflation is within historical limits, higher energy prices aren't resulting in drastically higher prices and the bond market suggests inflation is contained.

His comments eased concerns from investors that the Fed will raise rates too high and helped spark a late day rally.

Concerns over inflation and the direction of interest rates have weighed on markets since mid-May, leading to a selloff in overseas markets and leaving the performance of U.S. indexes in a shoddy state. The Dow is up a mere 2.8 percent for the year, while the Nasdaq is down 2.8 percent and the S&P is little changed since Dec. 30, 2005.

Bernanke's remarks also helped Asian markets to a higher close Friday. Major European markets finished lower. The dollar was mixed, falling on the euro but rising against the yen.

Treasury prices fell slightly, raising the yield on the benchmark 10-year note to 5.12 percent from the 5.09 percent level reached late Thursday.

Oil prices made modest gains. U.S. crude for July delivery rose 38 cents to settle at $69.88 a barrel on the New York Mercantile Exchange.

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by a margin of two to one on volume of 2 billion shares. On the Nasdaq, losers also beat winners by a margin of two to one as 2.5 billion shares changed hands.

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