Mixed news leaves stocks conflicted

Stocks finished a quiet session moderately lower Monday as investors grappled with concerns about the health of corporate profits after Wachovia posted disappointing quarterly results.

Investors paused after a sell-off Friday and ahead of a raft of quarterly results and economic data arriving this week.

Wachovia surprised investors by posting a first-quarter loss of $393 million and cutting its quarterly dividend by 41% to 37.5 cents. The bank, which analysts had expected to post a profit, also said it planned to raise $7 billion through a stock offering.

But investors appeared to find some encouragement in the session from a better-than-expected report on retail sales.

The Commerce Department’s reading on March retail sales, which showed a modest 0.2% rise after February’s 0.6% decline, appeared to quell some unease about the economy.

The March figure bested the flat reading analysts had predicted. Excluding a 1.1% rise at gasoline service stations, retail sales would have been flat last month -- and possibly negative when adjusted for inflation.

“We obviously came out with more bad financial news,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, referring to the Wachovia report. “The flip side is we had retail sales come in a little better than expected. It seems like they kind of negated each other.”

The Dow Jones industrial average fell 23.36 points, or 0.2%, to 12,302.06.

Broader stock indicators also declined. The Standard & Poor’s 500 index fell 4.51 points, or 0.3%, to 1,328.32, and the technology-laden Nasdaq composite index fell 14.42 points, or 0.6%, to 2,275.82. The Russell 2,000 index of smaller companies fell 2.09, or 0.3%, to 686.07.

Declining issues outpaced advancers by about 3 to 2 on the New York Stock Exchange.

Bond prices edged lower. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.51% in late trading from 3.47% late Friday.

Light, sweet crude oil rose $1.62 to settle at a record $111.76 a barrel, and gold prices rose $1.80 to $925.40.

The dollar was mixed against major currencies, losing ground against the British pound but gaining 0.003 on the euro, which fell to $1.581.

Investors sold off shares of financials, led by Wachovia, which fell $2.26, or 8%, to $25.55. Citigroup, which is scheduled to report its quarterly results Friday, fell 85 cents, or 3.6%, to $22.51.

Detrick noted that the Wachovia news compounded investors’ concerns about the banking sector after a report Friday from General Electric.

GE, seen as a bellwether of big business and the broader economy, said its financial services business was challenged in the first quarter by the slowing U.S. economy and difficult capital markets. The conglomerate’s disappointing first-quarter numbers sent the major indexes down by more than 2% on Friday.

“This is just more bad news for financials. It just confirms that the financials are by no means out of the woods yet,” Detrick said of Wachovia.

He says many investors are holding off any major moves ahead of corporate results and economic figures on inflation later this week.

“Today just seems like just a break from the massive selling we saw Friday. We want more confirmation from companies reporting earnings this week if indeed earnings are going to be weak or if the first inning was just a bad start to the game,” he said in reference to the early flow of first-quarter results.

In deal-making news, Blockbuster said it was taking an unsolicited $1-billion-plus bid for Circuit City Stores directly to shareholders. Blockbuster said the consumer electronics chain has dragged out a deal that has been under negotiation for months.

Circuit City jumped $1.07, or 27%, to $4.97, while Blockbuster fell 32 cents, or 10%, to $2.81.

Meanwhile, Northwest Airlines pilots have threatened to oppose a combination with Delta Air Lines, but officials nonetheless announced a deal to create the world’s biggest airline.

Northwest rose 26 cents to $11.22, while Delta advanced 47 cents, or 4.7%, to $10.48.

And in a sign that the slumping U.S. economy was hurting companies overseas, Netherlands-based Royal Philips Electronics reported a sharp drop in first-quarter profit as a decrease in television sales in North America offset growth in its healthcare and lighting businesses.

Overseas, Japan’s Nikkei stock average fell 3.1%. Britain’s FTSE 100 closed down 1.1%, Germany’s DAX index fell 0.7% and France’s CAC-40 fell 0.7%.