US Stocks Decline Modestly




U.S. stocks declined modestly Friday as a widening U.S. trade gap and continuing uncertainty over the fate of Egypt's regime prompted investors to retreat to safer assets.

The Dow Jones Industrial Average slipped 7 points, or 0.1%, to 12222. Leading the measure's declines, Kraft Foods dropped 1.9% after its fourth-quarter sales jumped 30% as the food company raised prices and sold more of its products, but higher costs for inputs and integrating its Cadbury acquisition squeezed profits.

Keeping its losses in check, J.P. Morgan rose 1.9%.

The Nasdaq Composite edged down 0.1% to 2787. The Standard & Poor's 500-stock index rose less than one point to 1322, as financials gained, but energy stocks declined.

Home builders weakened after the Obama administration unveiled a proposal Friday for winding down mortgage giants Fannie Mae and Freddie Mac. The steps are likely to mean higher borrowing costs and more limited access to home loans for consumers. Homebuilding company Lennar fell 1.5%, while D.R. Horton lost 1.2%.

Shuttering Fannie and Freddie may dent overall levels of home ownership, noted Lee Partridge, chief investment officer at Salient Partners. However, "in the long run, the demise of Freddie Mac and Fannie Mae would be good for the rest of the financial community," as other firms regain pricing power, he said.

Mortgage insurers surged on the government proposal's suggestion to shrink the size of the Federal Housing Administration, a government-run competitor to the private mortgage insurance industry. Shares of Genworth Financial jumped 4.6%, MGIC Investment surged 11% and PMI Group climbed 7.1%.

Meanwhile, investors registered some anxiety over the intensifying turbulence in Egypt after President Hosni Mubarak shocked protestors late Thursday with a difficult-to-interpret pledge to hand power to his vice president while staying on during the transition to a new governing structure. Egypt's powerful armed forces fell in behind Mubarak as protesters gathered for an 18th day of massive demonstrations.

The jitters over Egypt boosted the dollar, capturing support from its status as a safe retreat. The euro weakened, trading recently at $1.3556, down from $1.3594 late Thursday in New York. Demand for U.S. Treasurys rose, pushing yield on the 10-year note down to 3.61%.

However, crude-oil prices edged down, suggesting that the market may not be worried that the unrest in Egypt could threaten operations at the Suez Canal.

Among stocks in focus, Nokia sank, with U.S.-listed shares dropping 13% after the handset maker said it will adopt Windows Phone as its main smartphone platform, as part of a broad strategic partnership with Microsoft. Nokia offered no guidance for next year or new products, and said 2011 and 2012 are likely to be transition years. Analysts were also concerned that Nokia didn't cut its guidance for research and development costs as a result of the alliance with Microsoft, which most analysts had expected. Meanwhile, shares of Microsoft fell 1%.

Ford Motor rose 1.6% after saying it will cut its debt load by another $3 billion.

In Friday's economic data, the U.S. trade gap widened in December, with the full-year trade gap registering its biggest percentage increase in 10 years on the back of a record shortfall in trade with China, the Commerce Department said. The U.S. deficit in international trade of goods and services increased 5.9% to $40.58 billion from a slightly revised $38.32 billion the month before, topping economists' estimates for a $40.5 billion shortfall.

Separately, the Reuters/University of Michigan consumer sentiment reading for February edged up to 75.1, slightly better than the 75.0 expected by economists.