NEW YORK – Stocks ended mixed Thursday as investment bank Goldman Sachs reported smaller-than-expected revenues while a slew of data gave a mixed picture of the economy. The much-anticipated $25 billion combination of Johnson & Johnson and Guidant limited the Dow's losses.
The Dow Jones industrial average (search), which fell late in the afternoon, ended up 14.19 points, or 0.13 percent, to 10,705.64. The Standard & Poor's 500 Index (search) dropped 2.51 points, or 0.21 percent, to 1,203.21. The technology-laced Nasdaq Composite Index (search) finished down 16.40 points, or 0.76 percent, at 2,146.15.
While the market's overall trend remains higher, according to analysts, many investors repositioned their portfolios in advance of Friday's quadruple-witching day — the quarterly expiration of index futures and options, as well as individual stock futures and options, that tends to add volatility to the market.
The Nasdaq closed lower after three days in positive territory amid profit taking, with security software maker Symantec (SYMC) weighing on the index after the company said it would buy Veritas Software Corp. (VRTS).
"We've had a very nice run up in the market, so I think we were a little bit over-extended," said Todd Leone, head of listed trading at S.G. Cowen, echoing other traders who said that investors were taking profits after three days of market gains.
Goldman Sachs Group Inc. (GS) was down $3.85 at $105.40, despite reporting a 23 percent rise in fourth quarter profits on increased transaction volume and a rise in mergers and acquisitions. But while per-share earnings beat Wall Street estimates by 4 cents, revenues of $4.6 billion came in just under the $4.8 billion projected by analysts.
"I think the revenue numbers were lighter than The Street expected, but earnings-per-share numbers were better, so they probably had some cost savings put in there that The Street wasn't anticipating," said John O'Donoghue, CSFB managing director of listed trading.
Health care products bellwether Johnson & Johnson (JNJ) rose $2.55 to $63.45 after confirming a long-rumored plan to buy Guidant (GDT), one of the world's top makers of cardiac devices, for about $25.4 billion in cash and stock. Guidant, which makes pacemakers and cardiac defibrillators, lost 35 cents to $71.70 on the news.
This week's merger and acquisition traffic has been the most active since January 2000, according to research firm Dealogic, with deals involving Oracle Corp., Honeywell International and Sprint Corp. also making headlines.
At the Nasdaq, computer security giant Symantec Corp. (SYMC) sank $2.25 or 8.22 percent, to $25.13, after announcing a $13.5 billion deal to buy storage and backup program maker Veritas Software Corp. (VRTS). The merger is designed to create a one-stop shop for protecting against computer viruses and ensuring the reams of vital information stored on corporate networks remains accessible. Veritas shed 12 cents to $27.99.
"When companies are buying other companies, that's a very bullish sign," said Brian Williamson, an equity trader at The Boston Company Asset Management. "It shows confidence in the economy, and you get a trickle-down effect in speculation on other potential buyout targets in those sectors."
Oil prices remained steady a day after surging 6 percent on disappointing inventory data. Light, sweet crude for January delivery settled at $44.18 per barrel, down a penny, on the New York Mercantile Exchange (search).
The nation's current account deficit — the broadest measure of trade — climbed to a record high of $164.7 billion in the third quarter of this year, reflecting robust demand for imported oil and foreign-made goods. The latest snapshot of the country's trade situation was better than expected; economists thought it would rise to $171 billion.
Other economic news was mixed; new claims for jobless insurance fell to a five-month low last week, an encouraging sign of recovery in the labor market, but the number of housing projects to break new ground fell by 13.1 percent in November, its lowest level since May. Economists had expected a smaller drop.
"Housing starts were a little light... it looks as though the market took the numbers in its stride. We've got witching tomorrow, and I think that unless some economic numbers are way out of whack, it looks like we're in 'hold mode'..." said O'Donoghue.
Among decliners, government-sponsored mortgage provider Fannie Mae (FNM) slid $1.39 to $69.30, after the Securities and Exchange Commission found it had violated accounting rules. The company is likely to restate earnings for four years.
Trading was heavy, with 1.8 billion shares changing hands on the New York Stock Exchange, well above the 1.4 billion daily average for last year. About 2.3 billion shares were traded on Nasdaq, above the 1.69 billion daily average last year.
Declining shares led advancing shares on the Big Board by about a 2-to-1 margin, while decliners led advancers on the Nasdaq by about a 5-to-3 margin.
The Russell 2000 index, which tracks smaller company stocks, was down 6.38, or 0.93 percent, at 642.23.
Overseas, Japan's Nikkei stock average shed 0.29 percent. In Europe, France's CAC-40 gained 0.20 percent for the session, Britain's FTSE 100 closed up 0.15 percent and Germany's DAX index rose 0.48 percent.
Reuters and the Associated Press contributed to this report.