News at a Glance
Rally Halted: Stocks finish bullish week on a low note.
Pay Shrinks: Personal income falls 0.7%. Spending slows.
Crude Turns Flat: Oil gives up early gains.
Letdown at Dell: Profits fell on dicounts, weaker demand.
The Lowdown
The major indexes capped off a bullish week with a broad selloff.
Stocks finished lower Friday on disappointing economic data and a weak prognosis for the tech sector. The Dow Jones Industrial Average lost 171 points to finish the week at 11544. The Nasdaq dropped 44 to 2368, and the S&P 500 gave up 18 at 1283.
It was a stark turnaround for stocks, which had finished each session since Monday in the black and had their best day of the week the day before.
Traders eased off equities early after a Commerce report revealed personal income fell 0.7% in August, well below consensus estimates. At the same time, growth of personal spending slowed as higher prices and the economic slowdown continued to take a toll on consumers. Core inflation jumped 0.3% this month. That's just above the comfort zone of the Federal Reserve.
Separatetly, two other economic reports offered glimmers of a recovery. The Chicago Purchasing Managers Index, a measure of manufacturing strength, came in above estimates, and the revised August reading of the Consumer Sentiment index topped the economists' expectations.
Still, the bears roared, derailing the rally. The tech sector pulled the indexes down after Dell (DELL) posted a disappointing drop in second-quarter net income.
Dell cited its discount program and a broad decline in demand for new hardware. Dell warned of "continued conservatism in IT spending in the U.S., which has extended into Western Europe and several countries in Asia." The warning cast a shadow over the broader sector and helped hold the Nasdaq in check.
In energy, crude oil prices turned flat, and energy stocks declined. By 4 p.m., crude traded up a penny on the day at $115.60 a barrel.
In world markets, Japan's Nikkei climbed 2.4% after the nation introduced an economic stimulus package to curb stagflation. Hong Kong's Hang Seng rose 1.4%. In Europe, London, Frankfurt and Paris finished higher.
Corporate News
Lehman Brothers (LEH) is considering eliminating another 1,200 jobs, or roughly 5% of its workforce, Reuters reported, citing an anonymous source. Like many brokerges, Lehman is seeking to cut costs as it faces a mountain of bad loans and mortgages.
Dell (DELL) posted a 17% decline in second-quarter profit as discounts on computers eroded the firm's margins. Dell earned $616 million, or 31 cents a share, down from $746 million, or 32 cents a share, in the year-ago period, the firm said. Analysts had been looking for earnings of 36 cents a share. Chief executive Michael Dell said the drop in net income was largely a function of aggressive prices and called the decline "more self-inflicted."
Microsoft (MSFT) agreed to buy Greenfield Online, the parent company of ciao.com, in a deal worth $486 million, The Wall Street Journal reported. The deal is indicative of Microsoft's new push toward acquiring smaller firms to bolster its search presence in the wake of its failed bid for Yahoo (YHOO).
The Economy
Personal income fell by 0.7% in July, down from a June increase of 0.1%, the Commerce Department said. Meanwhile, personal spending rose 0.2%, up from a June increase of 0.6%. Core inflation for personal consumption expenditures climbed 0.3% after a comparable increase in June. Economists had predicted income would dip 0.2% in July, while spending would edge up 0.2%. REPORT
The Chicago Purchasing Managers' Index, a regional measure of manufacturing strength, rose to an August reading of 57.9, up from a July reading of 50.8, the Institute for Supply Management said. Economists had predicted the index would come in at 50.0. STORY
The August reading of the Consumer Sentiment Index was revised up to 63.0, up from a prior estimate of 61.7 and a July reading of 61.2, Reuters and the University of Michigan said. The increase brought the index to highest point in five months. Economists had expected the index to be revised up to 62.0. STORY
ReadMe
BusinessWeek on Obama's economic plan: The Democratic presidential nominee outlined his economic goals in his acceptance speech Thursday night in Denver. STORY
The Washington Post on Obama and organized labor: The unions, which had originally lent their support to Sens. Hillary Clinton and John Edwards, are now backing the senator from Illinois. He may need their support. "Don't Marry Carry Women." As of 2008, the five most powerful women in the world as ranked by Forbes are married. STORY
The New York Times on the political conventions: For large businesses, the conventions represent an opportunity to showcase their products and services to those capable of guiding policy initiatives toward law. STORY
WatchMe
Bloomberg on China: One of the most important buildings to the nation's economy had nothing to do the Olympic Games. VIDEO
CNBC on volatility: Benjamin Pedley, the managing director at LGT Investment Management (Asia), recommends investing in currencies to curb wild swings in your portfolio. VIDEO
Designed to Sell: A home's attic must be renovated before an open house. HGTV, 8 p.m.
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