Indexes Pull Back on Worries
Wall Street’s recent winning streak came to a halt Monday amid worries over bank earnings and nervousness ahead of Federal Reserve Chairman Alan Greenspan’s testimony to Congress later this week.
Key indexes fell modestly after rising the previous seven sessions. But trading volume was thin, suggesting little conviction in the selling.
The Standard & Poor’s 500 index, which hit a four-year high Friday, lost 6.79 points, or 0.6%, to 1,221.13.
The 30-stock Dow Jones industrial average gave up 65.84 points, or 0.6%, to 10,574.99, weighed down by a sharp drop in shares of Citigroup after its second-quarter profit report disappointed investors.
The technology-dominated Nasdaq composite also fell 0.6%, down 11.91 points to 2,144.87.
Falling stocks outnumbered winners by about 5 to 3 on the New York Stock Exchange and on Nasdaq.
Wall Street had rallied last week as some upbeat economic reports boosted optimism about second-quarter earnings.
But Citigroup, the largest U.S. financial company, reported quarterly results Monday that missed analysts’ expectations.
“Citigroup got the market off to a bad start,” said John Forelli, portfolio manager for Independence Investment in Boston. “Investors are preprogrammed for companies to beat expectations” on earnings.
About 150 of the S&P; 500 companies are scheduled to report results this week, including semiconductor giant Intel, Internet search firm Google and banking titan JPMorgan Chase.
Some analysts say they expect second-quarter results, overall, to impress investors.
Earnings-tracker Zacks Investment Research on Monday said that it expected quarterly operating profit for the S&P; 500 companies to be up 12% from a year earlier, compared with analysts’ consensus estimate of high-single-digit growth.
Prudential Equity Group market strategist Ed Keon raised his year-end target for the S&P; 500 index to 1,340 from 1,300, citing optimism about earnings. The index would have to rise 9.7% from current levels to meet his target.
After the market closed Monday, IBM reported second-quarter earnings that beat estimates. Its shares jumped to $85.50 in after-hours trading. The stock had dipped 57 cents to $81.81 in regular trading.
Some investors are staying sidelined ahead of Greenspan’s testimony Wednesday and Thursday, traders said. The Fed chief is expected to say the economy is in good shape, which would be supportive of stock prices but also could drive bond yields higher.
In other trading Monday, near-term oil futures fell 77 cents to $57.32 a barrel as Hurricane Emily in the Gulf of Mexico took a path away from most oil and gas rigs.
Among the day’s market highlights:
* Citigroup slid $1.42 to $45 on its profit report. Bank of America fell 90 cents to $45.08 even though its quarterly results beat estimates. Among other bank issues, Comerica dropped $1.04 to $58.97, Wells Fargo lost 88 cents to $61.99, and National City was off 29 cents to $36.41.
* Shares of major Wall Street brokerages were lower. Citigroup owns brokerage Smith Barney. Merrill Lynch gave up 94 cents to $56.67, UBS lost 47 cents to $80.38, and Bear Stearns dropped 54 cents to $105.36. But Charles Schwab rallied 63 cents to $13.37 on its earnings report.
* Industrial equipment maker Eaton surged $3.71 to $65.75. It said quarterly earnings rose 30% and boosted its full-year profit estimate.
Also in the industrial sector, Stanley Works jumped $4.45 to $51.17 after saying it would spend nearly $500 million on a European hand-tool maker, bolstering its market presence on the continent.
* Inco rose $1.75 to $41.78 on rumors that the nickel miner might be a takeover target for Switzerland-based Xstrata. Both companies declined to comment.
* Many retail stocks continued to rally on optimism about consumer spending. J.C. Penney jumped $1.06 to $56.31, Home Depot gained 84 cents to $42.45, and Federated Department Stores was up $1.03 to $74.82.
