Stocks fall at month’s end
The stock market retreated Monday as investors, wary about upcoming economic data, cashed in some profit on the last day of April -- the Dow Jones industrial average’s best month in more than three years.
The Dow managed to reach a new trading high before losing ground amid anticipation of today’s manufacturing data from the Institute for Supply Management. On Monday, the report’s precursor, the Chicago Purchasing Managers’ index of manufacturing activity in the Midwest, came in weaker than expected.
The Dow surged 5.7% in April, its biggest percentage gain since December 2003, largely due to first-quarter earnings that were stronger than analysts had predicted. Results released Monday by companies including phone giant Verizon Communications, gum maker Wrigley, cereal icon Kellogg and retailer RadioShack extended that trend.
Economic data Monday were mixed. Investors were pleased by the Commerce Department’s report that core inflation, as reflected in personal spending data, was 2.1% for the 12 months that ended in March -- lower than the 2.4% rise in the 12 months that ended in February. If inflation eases, the Federal Reserve is more likely to cut interest rates.
But the data also showed that personal spending increased only 0.3% in March. That, along with a slim gain in construction spending and the weak reading on Midwest manufacturing, caused some restraint among investors concerned that the economy might be slowing too quickly -- which could eventually hurt corporate profits.
“What the market is always going to ask is, ‘What have you done for me lately?’ ” said Alan Gayle, senior investment strategist at Trusco Capital Management. “The good earnings news has at least to some degree been reflected in stock market prices -- companies are going to have to continue generating these good numbers to see the market go higher.”
The Dow fell 58.03 points, or 0.4%, to 13,062.91 after setting an intraday high of 13,162.06. The Dow on Friday hit its 37th record close since October. It is now up 4.8% this year.
Broader stock indexes fell more sharply Monday. The Standard & Poor’s 500 lost 11.70 points, or 0.8%, to 1,482.37, while the Nasdaq composite dropped 32.12 points, or 1.3%, to 2,525.09.
The Russell 2,000 index of small-company stocks fell 15.13 points, or 1.8%, to 814.57.
Investors’ preference overall was for big-company shares in April: The S&P; 500 was up 4.3% for the month. By contrast, the Russell index gained 1.7%.
Declining issues outnumbered advancers Monday by nearly 3 to 1 on the New York Stock Exchange.
Bond yields tumbled in reaction to the data that showed tame inflation and slow growth, which would lower the chance of a Fed rate hike. The yield on the 10-year Treasury note fell to 4.62% from 4.69% on Friday.
The dollar continued to hover around an all-time low against the euro, which edged up a tenth of a cent to $1.365.
Crude oil futures fell 75 cents to $65.71 a barrel on the New York Mercantile Exchange.
Fueling Monday’s sell-off, the National Assn. of Purchasing Management-Chicago said its index of manufacturing activity was 52.9 in April, down from March’s reading of 61.7, the gauge’s highest level in two years. A reading above 50 indicates growth in Midwest manufacturing. A reading below 50 suggests contraction.
In other market highlights:
* Retailing stocks fell on the tepid personal spending numbers. Target declined $1.40 to $59.37. Home Depot lost 60 cents to $37.87. Coach, the largest U.S. maker of luxury leather handbags, tumbled $2.42 to $48.83. Consumer spending makes up more than two-thirds of the economy. Circuit City fell 48 cents to $17.45 in regular trading before warning that its April sales came in substantially lower than expected; the stock sank to $16.50 in late trading.
But Radio Shack rose $1.35 to $29.07 after the company reported healthy profit.
* Home builders fell after the government reported that growth in construction spending eased, rising 0.2% in March after increasing 1.5% in February. Westwood-based KB Home dropped $1.08 to $44.11. Pulte Homes sank $1.06 to $26.90, and Centex fell $1.25 to $44.77.
* Verizon, one of the 30 Dow stocks, reported that its first-quarter profit fell 8.4%, but revenue rose 17%. Verizon shares rose 29 cents to $38.18.
* Wrigley also posted strong first-quarter earnings. Its stock climbed $3.83 to $58.88.
* Earnings at Sysco, North America’s largest distributor of food to restaurants, disappointed investors after food costs increased and the company spent more to build distribution hubs. Net income of 35 cents a share was a penny shy of analysts’ estimates. The stock slid $1.58 to $32.74.
* In China, the Shanghai composite stock index rose 2.2% to a record high even though the nation’s central bank on Sunday took fresh steps to restrain bank lending, in an effort to slow the economy.
Stocks plummeted in Turkey amid a political crisis. The military threatened to block the ruling party’s presidential candidate because of his support for Islamist causes. The Turkish ISE-100 index slumped 4%. It still is up 15% this year.
