Stocks Slip Despite Oil Price Drop
Stocks slipped slightly Monday despite a sharp drop in oil prices and new strength in the dollar as investors worried about the market’s ability to hold its gains after last week’s rally.
Investors hoped the new week would extend an advance forged on mostly positive fourth-quarter earnings reports and reassuring economic data. Instead, Monday’s light trading meant that many players kept to the sidelines, unsure if the rally had staying power, particularly in light of the market’s poor performance in January.
“The question now is whether last week was just a technical bounce, or if there’s something here that we can trade on to the upside,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati. “So today, you have people waiting to see whether these gains stick.”
The Dow Jones industrial average fell 0.37 of a point, or 0.01%, to 10,715.76 after a 123-point gain Friday.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index was down 1.31 points, or 0.1%, at 1,201.72, and Nasdaq lost 4.63 points, or 0.2%, to 2,082.03.
Declining issues barely outnumbered advancers on the New York Stock Exchange.
There was no catalyst to keep buyers in the market Monday. President Bush released his $2.57-trillion budget proposal, which slashed spending across a wide swath of government programs but also included a record deficit.
“It’s a positive sign, certainly, and you’re seeing the dollar rise because of that,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. of the budget. “The question is, is it going to be torn apart by Congress? That’s a big battle on the horizon.”
Even a new three-week high for the dollar and a sharp drop in crude oil futures failed to move stocks. A barrel of light crude closed at $45.28, down $1.20, in New York trading.
The dollar, meanwhile, extended its gains Monday against the euro, which dropped to $1.278 as markets responded to Bush’s budget proposal. The dollar was also boosted by Federal Reserve Chairman Alan Greenspan’s comments Friday suggesting that the U.S. was coming to grips with its huge trade deficit.
The dollar also rose to 104.84 yen, a one-month high against the Japanese currency.
In the U.S. Treasury market, long-term bond yields continued their fall. The 10-year note dropped to 4.05%, a three-month low, from 4.08% on Friday.
In other market highlights:
* Qwest Communications International, which last week offered to buy MCI for $6.3 billion, dropped 46 cents to $4.39, the biggest decline in the S&P; 500. The company is looking at other options in case no agreement with MCI is reached, the Wall Street Journal reported, citing unidentified people familiar with the matter. MCI slipped 3 cents to $21.
Nextel Communications retreated 52 cents to $29.28. The company said it would spend $2.8 billion and give up some capacity for sending wireless calls in exchange for airwaves worth $4.86 billion, accepting a U.S. government plan to lessen interference on police radios.
* WellPoint slid $4.04 to $120.85. Profit last quarter declined 12% to $184.5 million, the company said, because of costs from a debt buyback and the purchase that formed the company.
Humana slipped 50 cents to $34.15. The biggest manager of health plans for the U.S. military said its fourth-quarter profit fell 29% to $47.1 million because of a new U.S. military contract that spreads income out more evenly throughout the year.
* Toy manufacturer Hasbro lost 40 cents to $20 after missing Wall Street profit expectations by 5 cents a share. The company blamed weak U.S. toy sales for a lackluster quarter.
* Aircraft parts manufacturer Goodrich said strong sales to Europe’s Airbus and to Boeing led to a sharp rise in profit for the quarter. Goodrich rose 93 cents to $35.43.
