Blue chips take a breather
Stocks finished a quiet session mostly lower Monday as investors cashed in some gains from last week’s rally and readied for third-quarter corporate earnings reports.
Earnings are expected to reflect the difficulty some companies have faced -- particularly in the financial and housing sectors -- amid upheaval in the credit markets. The reports will also offer insight into the fourth quarter, which market participants predict will bring more robust growth. Aluminum producer Alcoa kicks off earnings reporting season today.
The Dow Jones industrial average fell 22.28 points, or 0.2%, on Monday to 14,043.73.
Broader stock indexes were mixed. The Standard & Poor’s 500 index fell 5.01 points, or 0.3%, to 1,552.58, while the Nasdaq composite index rose 7.05 points, or 0.3%, to 2,787.37. The Russell 2,000 index of smaller-company stocks fell 4.74, or 0.6%, to 840.14.
Oil prices tumbled. Crude futures fell $2.20 to $79.02 a barrel on the New York Mercantile Exchange. Gold prices fell as the dollar rose against major rival currencies. The Treasury bond market was closed for the Columbus Day holiday.
Trading volume was low, with many investors off for the holiday. Decliners outnumbered advancers by nearly 2 to 1 on the New York Stock Exchange.
Last week, the Dow and the S&P; rose to new records as investors sensed that the economy was unlikely to fall into recession. But Monday, trucking company Ryder System generated some concern when it lowered its third-quarter and full-year forecasts, citing reduced demand for freight shipments.
“Economic conditions have softened considerably in more industries beyond those related to housing and construction,” the company said, sending its shares skidding $3.33, or 6.8%, to $45.92.
“What we’re experiencing now is a real slowdown in economic growth,” said David Chalupnik, who helps manage $100 billion as senior managing director at First American Funds in Minneapolis. “It’s difficult to get double-digit earnings gains when you have an economy growing at about 2%.”
The tech-heavy Nasdaq got a boost from Google, which surpassed $600 for the first time, extending a monthlong rally in the wake of upbeat projections for the company’s third-quarter earnings. Google went public at $85 in August 2004. On Monday, the stock rose $15.57, or 2.6%, to $609.62.
Nasdaq was also lifted by Business Objects after German software giant SAP said late Sunday that it would pay $6.79 billion for the French company. Business Objects’ U.S.-traded shares rose $7.56, or 15%, to $57.83. SAP fell $2.87, or 4.9%, to $56.36 as some analysts called the purchase price too high.
News of SAP’s deal for Business Objects preceded word Monday morning of a $1.1-billion bid by diversified conglomerate Textron for United Industrial, a defense contractor. United Industrial rose $4.77, or 6.3%, to $80.39. Textron fell $1.37, or 2.1%, to $64.01.
Although it’s harder to borrow money to finance takeovers than it was earlier in the year, companies appear to still have an appetite for making deals.
“We find it encouraging that there were two major buyouts this morning. It shows that the credit markets are firming up and companies are coming back into play,” said Ryan Detrick, strategist at Schaeffer’s Investment Research.
Among the day’s highlights:
Westwood-based Occidental Petroleum, the fourth-biggest U.S. oil company, slipped $1.24, or 1.9%, to $65.17 as crude prices slumped and after Friedman, Billings, Ramsey & Co. downgraded the stock.
A gauge of energy producers retreated 0.8%. Exxon Mobil, the largest crude producer, declined 68 cents to $90.68.
Freeport-McMoRan Copper & Gold, the world’s second-largest copper producer, dropped $2.53, or 2.3%, to $108.13. The price of the metal itself dropped 3%, the most since mid-August, on concern that a stronger dollar would curb demand.
Merrill Lynch dropped $2.55, or 3.3%, to $74.12. The world’s largest brokerage was downgraded by analysts at two rival firms after reporting $5 billion of losses from mortgage-related investments and buyout financing.
Financial companies in the S&P; 500 fell 0.8%. Analysts estimate that the sector’s earnings fell 8.9% in the third quarter, the biggest drop among 10 industries, Bloomberg data show.
Sprint Nextel fell 51 cents to $18.50 after USA Today reported that Chief Executive Gary Forsee planned to step down, which he did after the market closed. The telephone company appointed an interim successor to serve until a permanent replacement is named.
Sprint also settled a patent dispute with Vonage Holdings, sending the beaten-down shares of the provider of Internet-based phone service up $1.42, or 123%, to $2.57. Vonage’s stock is down 63% this year.
Expedia, the world’s biggest online travel agency, dropped 8 cents to $34.96 after Citigroup lowered its recommendation for the shares to “hold” from “buy.”
U.S.-traded shares of Britain’s HSBC Holdings lost $2.05, or 2.1%, to $96.66 after Europe’s biggest bank rejected a call from the California State Teachers’ Retirement System for an outside strategic review.
Overseas, key stock indexes fell 0.8% in Britain, 0.3% in Germany and 0.2% in France. Markets in Japan were closed for a holiday.
