Analyst downgrades of two Dow Jones industrials pressured Wall Street Thursday and encouraged investors to take profits one session after the major indexes reached new multiyear highs. Wall Street analysts said both The Coca-Cola Co. and JPMorgan Chase & Co. could face difficulties in 2006 as the economy slows and consumers limit their spending, both of which could have a much broader impact on stocks as the year goes on.
The market's move lower was unsurprising after the major indexes reached new 4 1/2-year highs Wednesday for the second time in a week, and the urge to consolidate those gains overcame good economic news. The Commerce Department reported that the nation's trade deficit narrowed by 5.7 percent last month, though it remained the third-largest deficit on record. In the first hour of trading, the Dow Jones industrial average fell 20.25, or 0.18 percent, to 11,023.19. Broader stock indicators also fell. The Standard & Poor's 500 index lost 1.39, or 0.11 percent, to 1,292.79, and the Nasdaq composite index dropped 3.46, or 0.15 percent, to 2,327.90. Bonds edged up on news of the narrowing trade gap, with the yield on the 10-year Treasury note falling to 4.44 percent from 4.45 percent late Wednesday. The dollar fell against most major currencies, while gold prices rose.
The resumption of nuclear research in Iran continued to drive oil prices higher as investors hedged against possible instability in the oil-producing region. A barrel of light crude was quoted at $64.50, up 56 cents, on the New York Mercantile Exchange. The downgrades of Coca-Cola and JPMorgan Chase weighed on the Dow. Coca-Cola dropped 25 cents to $41.42 after Goldman Sachs lowered its rating on the beverage maker to "in-line" from "outperform" on the belief that 2006 won't be a breakout year for the company.
And Piper Jaffray cut JPMorgan Chase to "market perform" from "outperform," saying the financial services company could see business slow down in the coming year, especially in stock trading and consumer loans. JPMorgan Chase slid 44 cents to $40.26, reports the AP. N.U.