Stocks Flat Amid Durable Goods, Oil Price Worries

NEW YORK – Stocks remained essentially flat Friday as wary investors kept a close watch on oil prices while digesting a satisfactory report on durable goods orders at the end of a losing week.

The blue-chip Dow Jones industrial average (search) closed up 8.34 points, or 0.08 percent, at 10,047.24. The Standard & Poor's 500 Index (search) ended up 1.75 points, or 0.16 percent, at 1,110.11. The technology-laced Nasdaq Composite Index (search) finished down 6.95 points, or 0.37 percent, at 1,879.48.

For the week, the Dow fell 2.3 percent, the S&P 500 lost 1.6 percent, while the Nasdaq dropped 1.6 percent. It was the second straight losing week for the Dow, which is languishing around 5-week lows. The Nasdaq's drop snapped a string of five weekly gains.

Crude oil futures ended at a record settlement high of $48.88 a barrel on the New York Mercantile Exchange (search), the highest seen on the exchange since crude oil futures were introduced in 1983, and within sight of the $49.40 intraday trading record set on Aug. 20.

"Oil is holding us back," said Todd Leone, head of listed trading, S.G. Cowen. "I think oil was a big factor today."

Investors sold off semiconductor-related stocks after Europe's top consumer electronics group Philips predicted much smaller growth for the semiconductor industry next year. The U.S. government said it would lend refiners crude from the Strategic Petroleum Reserve (search) (SPR), but traders deemed the loan too small to have a lasting impact.

Blue chips had risen slightly as government data showed better-than-expected demand in August for durable goods other than transportation equipment, but the climbing oil prices put the brakes on the gains.

Oil companies, which lost ground on Thursday on a ratings downgrade, recorded gains and helped support the Standard & Poor's 500 index. ChevronTexaco Corp. (CVX) rose 1 percent to $52.83.

Marathon Oil Corp. (MRO) rose 2.4 percent to $40.52 after Smith Barney raised its rating on the company, saying long-term oil prices will be about 15 percent higher than it previously expected.

In economic news, investors also got a lift from a Commerce Department (search) report on durable goods orders for August. While orders for goods designed to last three or more years fell 0.5 percent for the month, a large falloff in aircraft orders was to blame. Without transportation equipment, durable goods orders actually rose a strong 2.3 percent — a sign that businesses and consumers may have started spending again after a nervous summer.

"The durable goods numbers seem to give a little lift to the markets early on," said Stephen Carl, head of U.S. equity trading at The Williams Capital Group LP. "But really it has just been a modest move to the upside."

Consumers' apetite for large purchases, which help fuel economic growth, remained uncertain after the National Association of Realtors (search) reported a drop in existing home sales in August. The association said 6.54 million homes were sold for the month, less than economists were expecting and down from 6.72 million homes sold in July.

Caterpillar Inc. (CAT) gave a slight boost to the Dow, rising 62 cents to $75.12.

The technology sector was hit by another pair of profit warnings. Netherlands manufacturer Philips Electronics NV lost 26 cents to $22.95 after it warned that its semiconductor sales in the third quarter would be flat compared to the previous quarter, reducing its previous outlook.

Xilinx Inc. (XLNX), down 4.9 percent to $27.66, and Altera Corp. (ALTR), off 4.9 percent at $19.30, were among the biggest decliners on the Nasdaq. On the New York Stock Exchange, Texas Instruments Inc. (TXN) fell 3.4 percent to $21.69.

"They (semiconductors) got really hammered," said Robert Drust, managing director of listed trading at investment bank Wedbush Morgan in Los Angeles. "It looked like somebody just had a specific sell program and just pounded it."

Cisco Systems Inc. (CSCO), the largest maker of gear for directing traffic over the Internet, dragged on the S&P as its shares fell 2.7 percent to $18.40.

And consumer electronics maker Cirrus Logic Inc. (CRUS) lowered its sales forecast for the current quarter due to slow sales and high customer inventories. Cirrus Logic lost 19 cents to $4.89.

McDonald's Corp. (MCD) gave a slight boost to the Dow, rising 46 cents, or 1.7 percent, to $27.60.

Shares of mortgage giant Freddie Mac (FRE) climbed 21 cents to $64.59 despite the company's announcement that it reduced its overall 2003 earnings to reflect a $75 million reserve to be used for legal proceedings. The announcement came as sister company Fannie Mae (FNM) was sharply criticized by the government for its accounting practices. Fannie Mae was down $1.64 at $65.51.

Starbucks Corp. (SBUX) rose 37 cents to $45.04 after the coffee retailer said it would purchase up to 9 million shares in a stock buyback program.

U.S. blue chips slumped to near a five-week low Thursday after a sharp drop a day earlier as oil flirted with last month's record high and a key gauge of future economic activity fell for the third straight month.

Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume came to 136.2 million shares, compared with 143.87 million at the same point on Thursday.

The Russell 2000 index of smaller companies was up 0.17, or 0.03 percent, at 565.97.

Overseas, Japan's Nikkei stock average fell 1.1 percent. In Europe, Britain's FTSE 100 closed up 0.2 percent, France's CAC-40 climbed 0.6 percent for the session and Germany's DAX index gained 0.1 percent.

Reuters and the Associated Press contributed to this report.