Stocks pull back moderately

Wall Street began a holiday-shortened week with a moderate pullback in stocks Monday as investors recoiled at more evidence that even stronger companies were struggling as consumers cut back their spending.

Walgreen reported that its profit in the latest three months fell 10%, mostly because of the costs of opening more than 200 stores, and the drugstore operator said it would slow down its expansion.

Toyota Motor, meanwhile, slashed its earnings forecast for a second time, warning that it now expected to post an operating loss for the fiscal year that ends in March.

The loss would be the Japanese automaker’s first such loss since it began reporting results in 1941, it said, underscoring the challenges facing car companies. Toyota’s American rivals, General Motors and Chrysler, received a $17.4-billion lifeline from the federal government Friday to stave off bankruptcy.

Monday’s gloomy corporate news highlights how weak the consumer is, said Kim Caughey, equity research analyst at Fort Pitt Capital Group.

“Even though mortgage rates are coming down, we don’t see the consumer running out and buying that house,” Caughey said.

The Dow fell 59.34 points, or 0.7%, to 8,519.77, after briefly moving into positive territory early in the session, tumbling and then recovering some of its losses. Monday’s retreat was the fourth straight loss for the Dow.

Broader stock indicators also finished lower. The Standard & Poor’s 500 index fell 16.25 points, or 1.8%, to 871.63, and the Nasdaq composite index fell 31.97 points, or 2%, to 1,532.35.

The Russell 2,000 index of smaller stocks fell 2.3%. Smaller companies tend to be more vulnerable to economic weakness than larger companies.

On the New York Stock Exchange, declining issues outnumbered advancers by more than 2 to 1. Volume was light.

Toyota’s U.S.-traded shares fell 5.4%, while Walgreen fell 4.2%.

Also weighing on stocks was word from Caterpillar that it would cut executive compensation in 2009 because of waning demand for mining and construction equipment. Caterpillar shares fell 2.1%.

Oil prices fell along with stocks. The futures contract for February delivery, which became the near-term contract Monday, fell $2.45 to $39.91 a barrel on the New York Mercantile Exchange.

The Treasury Department auctioned $38 billion of two-year notes -- a record amount -- at an all-time low yield of 0.92%.

But the yield on the benchmark 10-year Treasury note edged up to 2.14%. The three-month T-bill, considered one of the safest short-term investments, rose to 0.04% from 0.01%.

The dollar was mixed against other major currencies, while gold prices rose.

Overseas, key stock indexes slumped 3.3% in Hong Kong, 1.9% in Britain, 1.2% in Germany and 2.3% in France. Shares in Japan rose 1.6%.