Skepticism Weighs on Indexes
Major stock indexes slipped in lackluster trading Monday as nagging questions about the outlook for corporate profits and the economy kept investors on edge as they await the flood of earnings reports due this week.
The Dow Jones industrial average fell 8.75 points, or 0.1%, to 8,328.90, while the broader Standard & Poor’s 500 index slipped 1.57 points, or 0.2%, to 892.01. The technology-heavy Nasdaq composite index eased 1.13 points, or 0.1%, to 1,424.37.
The overall market looked better: Winners led losers by about 9 to 7 on the New York Stock Exchange and Nasdaq.
But thin trading volumes kept share prices drifting as investors straggled back from a long holiday weekend. U.S. and European markets were closed Friday for Good Friday, while many in Europe remained closed for the Easter Monday holiday.
The latest financial results from many major U.S. companies have exceeded expectations, but Wall Street experts say much of the improvement is because of cost cutting rather than sales growth. Corporate America’s reluctance to offer clear forecasts for the quarters ahead also is keeping stocks under pressure, analysts said.
“The fact that the numbers are better than expected is certainly encouraging,” said Richard Nash, chief market strategist at Victory Capital Management in Cleveland. “But I think until you actually see some top-line revenue growth going with that, folks are going to continue to be skeptical.”
Solid earnings reports from blue-chip companies 3M and Merck failed to inspire much enthusiasm on Monday. High oil prices, which briefly surged over $31 a barrel during the session, and a report of soft sales at the world’s largest retailer, Wal-Mart Stores, also damped sentiment.
Merck, the world’s third-biggest drug maker, said its first-quarter profit rose 5% as strong sales of its hypertension drugs offset lower sales of arthritis treatment Vioxx. Its shares rose $1.07 to $56.96, helping the Dow.
Industrial conglomerate 3M, also a Dow stock, slipped 15 cents to $129.83. The firm said its quarterly earnings rose more than 11%, helped by strong sales in its new displays and graphics division and by cost controls.
Questions about the health of the economy also were nagging investors. The Conference Board’s index of leading indicators was weaker than anticipated, falling 0.2% last month after a 0.5% drop in February. Wall Street economists polled by Reuters had forecast a 0.1% decline in March.
In commodities trading, oil futures in New York closed just below $31a barrel after climbing to their highest level in nearly three weeks, with buying stoked by expectations that Thursday’s meeting of the Organization of the Petroleum Exporting Countries will decide on production cuts to prevent another price slide.
Investors are worried that high energy costs could bite into corporate profit growth, particularly in an uncertain economic environment.
Gold rose $6.30 to $333.50 an ounce in New York trading, mainly on technical factors. The dollar gained against the euro and the yen, and the yield on the benchmark 10-year Treasury note rose to 3.99% from Thursday’s close of 3.96%.
In other highlights:
* U.S. Steel rallied 93 cents to $13.06. National Steel, operating in bankruptcy, agreed Thursday to sell its assets to U.S. Steel for $1.05 billion in cash and assumed debt. A judge approved the sale Monday.
* Wal-Mart said April sales at stores open at least a year were coming in at the low end of its plan. Warm-weather items lingered on shelves, which played on investors’ fears that consumers are reining in their spending. Its shares fell 43 cents to $54.98.
* Whirlpool, the largest home-appliance maker, reported first-quarter earnings in line with estimates, but cut its 2003 outlook, saying that demand is below expectations. Its shares still rose $1.05 to $54.73.
* Cash-strapped energy company Williams surged 12% after it said it had agreed to sell its 54.6% stake in Williams Energy Partners for $512 million, a move that will wipe $570 million of debt from its balance sheet. Williams rose 69 cents to $6.59.
Williams rival El Paso rose 63 cents to $7.80. Like Williams, El Paso is in the midst of an aggressive asset-sale program aimed at raising cash to pay down debt.
Market Roundup, C10-11
