Dow flirts with 13,000, then falls
Stocks retreated from historically lofty levels Monday as rising oil prices gave some investors pause. The Dow Jones industrials came within 17 points of 13,000 before pulling back.
Another surge in takeover activity helped fuel a morning rally. The Dow hit a new trading high of 12,983 after British bank Barclays said it would acquire Dutch bank ABN Amro for $91.2 billion, and British drug maker AstraZeneca said it would buy U.S. drug maker MedImmune for $15.6 billion.
Although the U.S. economy has been slowing, global takeover activity remains robust, underpinning the stock market’s spring rally. Also, first-quarter earnings reports have been better than expected.
But stocks pulled back in afternoon trading, hurt by a jump in oil prices.
The Dow ended with a loss of 42.58 points, or 0.3%, to 12,919.40.
The latest jump in crude oil prices to nearly $66 a barrel reignited inflation worries, and reminded Wall Street that other economic obstacles exist as well, such as a weak dollar and stumbling housing market.
Analysts said investors were trading deliberately, and avoided succumbing to pre-13,000 euphoria. Although the Dow passed 12,000 only last October, there appeared to be little of the kind of frenzy that drove the market’s major indexes to record after record during the dot-com boom.
“Anytime you approach a new milestone -- especially 13,000, which is a psychological barrier -- it’s not going to happen overnight. It’s going to take some time,” said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. “The market has gone up on earnings, and the earnings story has already been factored in.... There are a lot of negative things out there that the market has been ignoring.”
On Friday, the Dow rose 153 points to 12,961.98, posting its seventh straight gain and third straight record close.
On Monday, broader indexes pulled back with the blue-chip Dow. The Standard & Poor’s 500 fell 3.42 points, or 0.2%, to 1,480.93. The index is about 3% away from its record close of 1,527.46, reached in March 2000.
The technology-dominated Nasdaq composite slipped 2.72 points, or 0.1%, to 2,523.67. It stands at about half its record closing level of 5,048.62, also reached in March 2000.
The Russell 2,000 index of smaller companies fell 1.31 points, or 0.2%, to 827.55.
Crude oil climbed $1.78 to $65.89 a barrel in New York on concerns that oil supplies could be disrupted as violence escalates in Nigeria. The recent high for oil was $66.03 on March 29.
Gold prices slipped. The dollar rose slightly against the euro and British pound, but is still trading at historically low levels versus those currencies.
The dollar’s recent drop is not necessarily bad for the U.S. economy; it makes U.S. goods comparatively cheaper and therefore more attractive to foreign importers. However, a weaker dollar reduces its allure as an investment currency, especially as interest rates rise in other countries.
Corporate profits have been cooling after more than three years of double-digit growth, but nonetheless have been generally stronger than expected so far this earnings season.
In other market highlights:
* Merger-and-acquisition activity continues to boom. Barclays’ buy of ABN Amro would be the world’s biggest bank deal, and will lead to ABN Amro selling its U.S. unit, LaSalle Bank, to Bank of America for $21 billion.
Bank of America fell 53 cents to $50.51.
MedImmune, AstraZeneca’s takeover target, soared $8.56, or 18%, to $56.57. AstraZeneca fell $3.13 to $55.91.
* Bausch & Lomb rocketed $7.01 to $61.93 on rumors that the eye-care products company was a takeover target. A spokeswoman declined to comment.
* Los Angeles-based Reliance Steel & Aluminum jumped $2.49 to a record $61.52, continuing the surge that began after the metals-processing company on Thursday said its first-quarter earnings soared 55% on an 86% jump in sales. Reliance has grown dramatically in recent years via acquisitions. The stock is up 56% this year.
* After the closing bell, Texas Instruments issued better-than-expected first-quarter results. Shares closed down 9 cents at $32.41 in the regular session, but surged to $35.49 after hours.
* Other earnings reports from companies including Hasbro and Kimberly-Clark came in strong. Hasbro rose $2.33, or 7.7%, to $32.54, while Kimberly-Clark fell 84 cents to $71.10.
Later this week, investors will see results from six more of the Dow index companies, as well as data on the housing market, durable goods, gross domestic product and consumer confidence.
“We still have quite a bit of earnings news this week. Generally, that’s going to be positive. As long as the economic data falls in line, we should still continue to push prices higher,” said Jack Ablin, chief investment officer at Harris Private Bank.
* Bond yields continued to drift. The benchmark 10-year Treasury note yield dipped to 4.64% from 4.67% on Friday.
* In Chinese trading, the Shanghai composite index jumped 3.5% to a record 3,710.89. The index had slumped 4.5% on Thursday on worries that the Chinese government might take new steps to cool the economy. But investors have quickly returned to the market.
