Stocks Lose Ground Again as Profit Worries Continue
Investors sent stocks falling again Monday, with the Nasdaq and Standard & Poor’s 500 indexes closing at new lows for the year amid lackluster corporate earnings outlooks.
Trading on Wall Street remained tepid, as investors awaited earnings reports later in the week from Aetna, Boeing, Exxon Mobil, Time Warner and others.
Even more important, investors were waiting for further data to help determine whether the economy’s slowdown in June was an aberration -- or a sign of things to come.
“This is much more than the usual summer doldrums. There’s a message coming from the market here,” said Hugh Johnson, chief investment officer at First Albany Corp. “If I were to simplify that message, it’s that the economy and earnings in the third and fourth quarter won’t be as strong as we expected.”
The Dow Jones industrial average was nearly flat, falling 0.30 point to 9,961.92. But the Nasdaq composite index and S&P; 500 posted their lowest closes for 2004.
The S&P; 500 index was down 2.13 points, or 0.2%, to 1,084.07, its lowest close since Dec. 17. Nasdaq shed 10.07 points, or 0.5%, to 1,839.02, its lowest close since Oct. 2.
Declining issues outnumbered advancers by nearly 5 to 2 on the New York Stock Exchange.
With more than half the companies that make up the S&P; 500 reporting second-quarter earnings so far, more than two-thirds have exceeded forecasts. But the strong profits have been overshadowed by trimmed-back outlooks for the rest of the year from a number of major corporations.
Even strength in the housing sector was not enough to rouse buyers Monday. Existing home sales rose 2.1% to a record in June, according to the National Assn. of Realtors, as buyers rushed to lock in low interest rates.
“We certainly haven’t had that one blockbuster story to focus on. In the absence of that, the sideways trend we’ve been expecting has become a downtrend,” said Brian Pears, head equity trader at Victory Capital Management.
“We’ve lacked an obvious catalyst for the second half. I think traders have been waiting for that one big sell-off to get back in the market, but we’ve been drifting slowly downward, and I don’t think we’ll get that big sell-off,” he said.
In other markets highlights:
* Treasury yields rose, with some traders betting that this week’s round of economic data will show that the U.S. economy is stronger than the June numbers suggested. Bond prices, which fall as yields rise, were also influenced by plentiful supply -- $35 billion of new government issues will make their way into the market this week.
The yield on the benchmark 10-year note rose to 4.49% from 4.43% on Friday.
* The price of oil futures slipped 27 cents to $41.44 a barrel in New York as investors banked profits from recent gains. With the summer driving season half over, inventories are at “comfortable” levels, one trader said.
* Healthcare and pharmaceutical stocks rose as Mylan Laboratories offered to buy King Pharmaceuticals for $4 billion in stock.
Mylan’s earnings were flat compared to a year earlier, missing forecasts by 2 cents a share. That, combined with the King offer, caused Mylan shares to fall $3, to $15.51. King surged $2.52, to $12.89.
* Financial stocks moved slightly higher as Spanish bank Banco Santander offered about $15.3 billion for British mortgage lender Abbey National. Citigroup fell 50 cents to $43.81 after the financial giant was mentioned as a potential alternative buyer for Abbey National.
American Express rose 79 cents to $48.90 on second-quarter profit that beat analyst expectations. Bank of America was up 41 cents at $85.27.
* The market had a mixed reaction to Food and Drug Administration approval of a cholesterol drug from Merck & Co. and Schering-Plough. Merck fell 16 cents to $45, while Schering-Plough climbed 81 cents to $19.56.
* AT&T; advanced 71 cents to $14.73. The company probably will be the target of a takeover bid, Newsweek magazine reported, citing unidentified sources. AT&T; declined to comment.
