Dollar’s Slide Damps Stocks
Stocks declined modestly Monday as a weakening U.S. dollar and a mixed batch of earnings reports led cautious investors to cash in on last week’s gains. Oil prices also fell sharply as energy traders took profits after futures’ recent run-up.
Disappointment over lower profit at Xerox and a reduced 2007 forecast from TD Ameritrade Holding overshadowed strong results from Caterpillar. Investors largely ignored the earnings news, however, as they readied for Federal Reserve Chairman Ben S. Bernanke’s congressional testimony and the gross domestic product reading later this week.
A steep drop in crude futures gave investors some relief after oil’s recent climb to a record $75 a barrel. The market’s trends suggest oil prices will stabilize or retreat further in the coming weeks, said Rick Pendergraft, an equity trader at Schaeffer’s Investment Research.
“Looking at some of the data, I can see oil moving sideways or maybe lower,” said Pendergraft, who added that many oil-related stocks are overbought. “To me, it was everybody jumping on board at the same time. They didn’t think $75 could be taken out.”
Persistent worries about Iran’s nuclear arms program nonetheless kept the market on edge. A barrel of light crude sank $1.84 to settle at $73.33 in New York trading.
The Dow Jones industrial average dropped 11.13 points, or 0.1%, to 11,336.32. The Dow ended Friday at its highest level since early January 2000.
Broader stock indicators also finished lower. The Standard & Poor’s 500 index fell 3.17 points, or 0.2%, to 1,308.11, and the Nasdaq composite index declined 9.48 points, or 0.4%, to 2,333.38.
Bonds rebounded somewhat after their recent slide, with the yield on the 10-year Treasury note slipping to 4.98% from 5.01% on Friday.
The dollar plunged against the Japanese yen and fell against other major currencies as well. Gold futures backed off a 25-year high, falling $11.60 to $620.60 an ounce.
Wall Street faced another session with no new government data to give traders clues about the economy’s health, but this week brings crucial readings of new-home sales, jobless claims, labor costs and GDP growth. Bernanke is also scheduled to speak before the Joint Economic Committee on Thursday.
The major indexes finished higher last week, boosted by signs that the Fed could soon end its series of interest rate increases. However, the continued rise in energy and consumer prices have investors still fearful of inflation.
Ed Peters, chief investment officer at PanAgora Asset Management, said many on Wall Street appeared to mistake last week’s Fed comments as a signal it would soon stop raising rates. Peters said the central bank instead planned to keep hiking rates while looking for hints of softening economic growth.
“Just about everything that has to do with the economy will be looked over carefully and reacted to,” Peters said. “But right now good news is not good for the market. At the same time, bad news isn’t good either.”
In other market highlights:
* Consumer products maker Kimberly-Clark said its profit fell by more than a third as it paid higher prices for raw materials. But without one-time items, earnings beat estimates by a penny. Kimberly-Clark gained $1.33 to $58.52.
Procter & Gamble, the largest U.S. household-goods maker, added 26 cents to $56.60.
* Although increased trading and the acquisition of TD Waterhouse’s securities unit helped more than double earnings at TD Ameritrade, a weakened 2007 outlook sent its stock falling $2.09 to $19.41.
* American Express’ profit fell after logging charges from last year’s spinoff of Ameriprise Financial. American Express dropped 47 cents to $51.78.
* Xerox lost 80 cents to $14 after saying its profit declined modestly last quarter. Caterpiller fell 49 cents to $77.38 despite its earnings growing 45% on an uptick in sales.
* Cendant is considering a sale of its Orbitz website and other ticketing operations -- rather than a spinoff -- after the company received unsolicited offers of as much as $4.5 billion for the business, according to media reports. Cendant gained 64 cents to $17.49.
* The Amex airline index jumped 4%, its biggest one-day gain since January, on the retreat in oil prices. AMR, the parent company of American Airlines, advanced $1.66 to $24.12.
US Airways Group rallied $4.17, or 11%, to $41.90. The airline was raised to “overweight” from “neutral” by a Prudential analyst who said the company may report a first-quarter profit, excluding some items, of 10 cents a share, compared with his previous estimate for a loss of $1.73 a share.
Bloomberg News was used in compiling this report.
