A Mixed Session for Stocks
Stocks ended mostly lower Monday despite a sharp drop in oil prices, as investors remained on edge about geopolitical turmoil and the economy.
Still, Wall Street’s mixed finish offered hope that the selling wave at the end of last week had crested.
The Dow Jones industrial average eked out a gain of 8.01 points, or 0.1%, to 10,747.36 after diving 351 points, or 3.2%, last week.
Within the Dow, an upbeat earnings preview from McDonald’s offset a disappointing report from Citigroup.
The Nasdaq composite index also stabilized after last week’s slump, adding 0.37 of a point to 2,037.72. The technology-heavy index had tumbled 4.4% last week.
But losers outnumbered winners on the New York Stock Exchange and on Nasdaq, and most major indexes fell a fourth straight day. The Standard & Poor’s 500 index lost 1.71 points, or 0.1%, to close at 1,234.49.
The conflict between Israel and Hezbollah militants in Lebanon shook global markets last week and sent oil prices to a record Friday on fears that the fighting could spill into other areas of the Middle East.
On Monday, however, near-term oil futures in New York fell for the first time in five sessions, dropping $1.73 to $75.30 a barrel.
That decline wasn’t likely to spur a strong relief rally in stocks, analysts said, because investors remain concerned about the effect that energy costs will have on the economy.
“It’s the outlook for the second half” of the year that’s weighing on the market, said Bart Barnett, head of listed trading at Memphis, Tenn.-based Morgan Keegan & Co. “What is the global landscape going to look like?”
Wall Street hopes to get more guidance in that regard this week from second-quarter earnings reports and from Federal Reserve Chairman Ben S. Bernanke, who will testify before Congress on Wednesday and Thursday.
A Fed report Monday on U.S. industrial production in June was stronger than expected, but an index of manufacturing activity in the New York region fell sharply early in July, a separate report said.
On the earnings front, McDonald’s preliminary estimate of a 59-cents-a-share second-quarter profit, excluding one-time items, was better than the 56 cents analysts had expected. The fast-food chain credited strong overseas sales and increasing breakfast demand for the gains.
McDonald’s shares jumped $1.68 to $34.72.
But financial giant Citigroup fell $1.18 to $46.40 after its quarterly results missed expectations.
“Earnings look OK, but not enough for the market to push stocks higher,” said Peter Dunay, who helps manage $150 million as chief investment strategist at Leeb Capital Management in New York. “Investors want to digest more of earnings season, and they want to see how the Middle East goes from here.”
The Treasury bond market was flat Monday, after benefiting last week as some investors fled stocks for bonds. The 10-year T-note yield ended at 5.06%, unchanged from Friday. The yield is down from 5.13% a week ago.
Nonetheless, after the strong industrial production report, futures markets in Chicago raised their bets that the Fed would lift its benchmark short-term rate another quarter point at policymakers’ Aug. 8 meeting. The probability of a rate hike jumped to 62% from 54% in Friday’s futures trading.
Prices of gold and other commodities fell with oil. Near-term gold futures in New York tumbled $16 to $650.60. Gold had risen sharply last week as Mideast tensions escalated.
Among Monday’s market highlights:
* Restaurant shares moving higher with McDonald’s included Wendy’s, up 40 cents to $58.77; IHOP, up 42 cents to $45.94; and Burger King, up 43 cents to $15.77.
* Energy shares were broadly lower as oil fell. ConocoPhillips sank $2.30 to $65.15, Marathon Oil tumbled $2.91 to $84.95 and Schlumberger sank $4.29 to $63.78.
* Other commodity-related stocks also lost ground. Among mining firms, Phelps Dodge slid $2.84 to $76.95 and Rio Tinto was down $10.57 to $193.88.
* In the steel sector, U.S. Steel dropped $2.70 to $63.55.
* Shares of major home builders hit new 52-week lows on continued concerns about the housing market. KB Home lost 57 cents to $39.35, Ryland fell 69 cents to $36.40 and Toll Bros. was down 31 cents to $23.39.
* Gains in some Internet-related shares helped lift Nasdaq. Google gained $4.39 to $407.89, EBay rose 98 cents to $26.56 and Amazon.com was up 75 cents to $33.67.
* Apple Computer jumped $1.70 to $52.37 after an upbeat article on the company appeared in Barron’s magazine. The stock is down 27% this year.
* Utility stocks attracted buyers as the nationwide heat wave spurred record power production. FirstEnergy gained 30 cents to $54.18 and American Electric Power was up 24 cents to $34.82.
