Stocks Dip in Hesitant Trading
Stocks edged lower Monday as some investors locked in gains from last week’s rally while others took a cautious stance ahead of some key economic reports and next week’s Federal Reserve meeting.
The Dow Jones industrial average slipped 16.07 points, or 0.2%, to 10,935.17 after retreating from an early 44-point advance.
Broad-market indicators also surrendered modest morning gains. The Nasdaq composite index, which rose 5.6% last week and has bounced 34% from its low point in early April, lost 17.96 points, or 0.8%, to 2,173.57.
The Standard & Poor’s 500 index fell 0.2% to 1,263.51.
Losers outnumbered winners by 10 to 9 on Nasdaq and by 8 to 7 on the New York Stock Exchange. Trading volume was light.
With no new major economic reports to steer sentiment, many investors took to the sidelines, mindful of some data due later in the week that may sway Fed officials on whether to keep cutting interest rates to revive the economy.
Alfred E. Goldman, director of market analysis for A.G. Edwards & Sons Inc. in St. Louis, said the stock market can be expected to trade “in a choppy fashion between now and the expected rate cut” a week from today.
Stocks posted strong gains Friday, boosting the Dow 154 points, as initial worries about a dismal report on unemployment gave way to growing confidence that Fed officials will lower the central bank’s lending rates for the fifth time this year when they meet next week.
In the bond market Monday, shorter-term yields continued to slide while long-term yields held steady.
Energy stocks were prominent on the most active lists with the announcement of two mergers.
Williams Cos. of Tulsa, Okla., said it will buy natural gas producer Barrett Resources Corp. for $2.5 billion in cash and stock, topping a $2-billion hostile bid by the U.S. unit of Royal Dutch/Shell Group. Barrett’s stock rose $2.85 to $70.15, while Williams’ stock was down $2.39 at $39.28.
Meanwhile, Valero Energy said it was buying Texas rival Ultramar Diamond Shamrock for about $4 billion in cash and stock in a deal that will make Valero the second-largest U.S. refiner of petroleum products. Valero’s shares dropped $2.77 to $42.70, while Ultramar’s soared $7.79 at $50.50.
But the rest of the energy sector was mixed, as oil and natural gas prices pulled back. Natural gas futures fell more than 5% to a nine-month low on expectations that mild weather in the northern U.S. will mean little demand for gas to heat homes or generate electricity for air conditioning.
Natural gas for June delivery fell 25.1 cents, or 5.6%, to $4.239 per million British thermal units on the New York Mercantile Exchange, the lowest closing price for a most-active contract since Aug. 15.
It was the biggest one-day decline since Feb. 14. Prices still are up 40% from this time last year because of tight supplies.
Among other energy stocks, Exxon Mobil rose 64 cents to $88.19 and Anadarko Petroleum gained 98 cents to $63.04, while Sunoco fell 82 cents to $37 and El Paso lost $1 to $66.55.
Other market highlights:
* Home builders such as Centex Corp. gained as investors bet the Fed will lower rates. Home builder and other construction stocks benefit from lower interest rates, which reduce the cost of financing new homes.
Centex rose 67 cents to $44.40, Pulte gained $1.35 to $45, and Ryland rose $1.95 to $53.91.
* Some financial shares took a hit after Prudential Securities cut its investment rating for J.P. Morgan Chase to “sell” from “hold.” J.P. Morgan, a Dow component, was down $1.40 at $49.20.
Also falling were Citigroup, down 13 cents to $50.65, and American Express, down 62 cents to $43.23.
* Lucent Technologies shares fell 69 cents to $10.46 after the struggling telecom equipment giant said its chief financial officer was replaced after just a year on the job.
