Stocks Slip on Trendless Day

Wall Street sputtered to a mixed finish Monday, unable to sustain Friday’s rally, which was sparked by new hopes for an end to the Federal Reserve’s credit-tightening campaign.

In July, the stock sectors that scored hefty gains included utilities, energy and real estate investment trusts, while smaller stocks, technology issues and transportation stocks tumbled.

Major stock indexes were little changed for the day, and winners and losers were nearly evenly matched on the New York Stock Exchange.

The Dow Jones industrial average slipped 34.02 points, or 0.3%, to 11,185.68.

The Nasdaq composite index edged down 2.67 points, or 0.1%, to 2,091.47, and the Standard & Poor’s 500 index eased 1.89 points, or 0.2%, to 1,276.66.

The Dow jumped 119 points on Friday and Treasury bond yields fell after the government said the economy’s growth rate slipped to an annualized 2.5% in the second quarter, a slower pace than many analysts had forecast.

That boosted expectations that the Fed soon would stop raising short-term interest rates. Policymakers’ next meeting is scheduled for Aug. 8.

But on Monday, Janet Yellen, president of the San Francisco Federal Reserve Bank, and William Poole, president of the St. Louis Fed, said separately that the Fed faced a tough call on interest rates because of inflation pressures amid a weakening economy.

“There’s no trend” in the stock market, said Gil Knight, who helps manage $81 billion at Gartmore Global Investments, “because we really don’t have a firm handle on what the Fed’s intentions are. There’s a lot of confusion among investors and it’s welling up in the stock market. One day everybody’s happy, and the next they’re not.”

Some trends were evident in July, however. Investors generally sought out so-called defensive stocks, or companies whose sales and earnings would be expected to hold up reasonably well if the economy continued to cool.

The Dow utility-stock index, for example, jumped 4.7% during the month, lifting its year-to-date gain to 7%.

Utilities also benefited as nervous investors looked for issues that pay substantial cash dividends, which can provide a buffer in a falling stock market.

That trend helped blue-chip stocks as well. The S&P; 500 was up 0.5% for the month.

Real estate investment trusts, which invest in commercial property, also prospered amid the hunt for dividend income. A Bloomberg index of 150 REIT shares rose 3.2% for the month and is up 13.3% since New Year’s.

On the downside, smaller stocks, tech shares and transportation issues fell in July as investors ditched sectors that could be hurt by a weakening economy.

The Russell 2,000 small-stock index lost 3.3% for the month, cutting its year-to-date gain to 4.1%.

Transportation stocks were hit hard by economic concerns last month. The Dow transports index plunged 11.1%, paring its year-to-date gain to 4.4%.

One economic report Monday hinted that business might be picking up. An index of Chicago-area manufacturing activity rose to 57.9 in July from 56.5 in June. A reading greater than 50 signals growth.

On Friday, the government will report employment data for July. That could be crucial information for the Fed as it decides what to do with interest rates.

Among Monday’s market highlights:

* Energy-related stocks rallied, extending their gains for the month, as oil and natural gas prices rose. Near-term crude futures in New York added $1.16 to $74.40 a barrel.

Baker Hughes rose $2.05 to $79.95, Sunoco gained $1.22 to $69.54 and EOG Resources was up $2.09 to $74.15.

* Avon Products slumped $3.82 to $28.99 after the company said profit fell for the fourth straight quarter because of costs to eliminate jobs and boost flagging sales.

But Humana surged $4.39 to $55.93 after the healthcare provider said second-quarter profit rose 10%, helped by results at its Medicare program.

* Phelps Dodge, the world’s No. 3 copper producer, soared $5.84 to $87.34 on speculation the company could be a takeover target or pay a special dividend as odds improve that its bid for nickel miner Inco will fail. Teck Cominco increased its hostile bid for Inco on Monday to thwart Phelps Dodge’s offer. Inco gained $1.37 to $77.77.

* In the bond market, the yield on the 10-year Treasury note slipped to a seven-week low of 4.98% from 4.99% on Friday, as bond investors continued to bet the economy would slow further.

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Mixed month

How key stock market indexes performed in July and their year-to-date gains or losses:

*--* Pctg. change: Index July YTD Dow utilities +4.7% +7.0% NYSE energy +4.0 +16.0 Bloomberg REITs* +3.2 +13.3 NYSE composite +0.9 +6.3 S&P; 500 +0.5 +2.3 Dow industrials +0.3 +4.4 Russell 2,000 -3.3 +4.1 S&P; small stocks -3.5 +3.5 Nasdaq composite -3.7 -5.2 Dow transports -11.1 +4.4

*--*

*Real estate investment trusts

Source: Bloomberg News