Stocks slip ahead of earnings reports
So much for the Santa Claus rally.
A late-December run-up in stock prices that generated optimism that the worst was over is crumbling on worries that corporate profit reports this week will signal that an economic recovery is further off than Wall Street had hoped.
The Dow Jones industrial average fell for a fourth straight session Monday as oil prices tumbled and worries about the financial sector grew.
From its bear-market low set Nov. 20 through the first trading day of 2009, the blue-chip gauge rose 20%. But since then it has backslid 6.2%. Year to date, it is down 3.4%.
Wall Street already expects to see bleak fourth-quarter earnings data, especially after several companies warned last week that they were being hit hard by the recession. Shares of Alcoa tumbled 6.9% on Monday after losing 11% last week on the aluminum giant’s disclosure of production cuts in the wake of plunging demand for the metal.
After the market closed Monday, the company said it lost $1.19 billion in the fourth quarter.
Financial stocks also declined after a prominent analyst said Citigroup, the beneficiary of two government infusions of capital, might need to raise more cash. And a deal that could be announced as early as Wednesday between Citigroup and Morgan Stanley to combine their brokerage operations underscores some banks’ persistent balance-sheet woes.
Citigroup’s shares, which have fluctuated sharply since the start of the year, dropped 17%. Bank of America gave up 12%. An index of financial stocks in the Standard & Poor’s 500 index fell 5.7%. Morgan Stanley fell only 1.4%.
The Dow Jones industrial average fell 125.21 points, or 1.5%, to 8,473.97 after being down as much as 178.
Broader stock indicators also declined. The S&P; 500 index fell 20.09 points, or 2.3%, to 870.26, and the Nasdaq composite index fell 32.80 points, or 2.1%, to 1,538.79.
The Russell 2,000 index of smaller companies fell 2.6%.
Declining issues outpaced advancers by more than 3 to 1 on the New York Stock Exchange.
The market’s decline Monday followed its worst week since November. The Dow slid 4.8% last week. Still, the index remains up 12% from Nov. 20 when it closed at its lowest level since 2003.
Stocks fell Friday after the Labor Department reported that unemployment jumped to a 16-year high of 7.2% in December. The rise in the number of people without work has raised concerns about the health of consumer spending, which accounts for more than two-thirds of U.S. economic activity.
In other market highlights Monday:
* Treasury bonds were mixed. The yield on the benchmark 10-year T-note fell to 2.31% from 2.4% late Friday.
* Oil futures fell $3.24 to settle at $37.59 a barrel on the New York Mercantile Exchange.
* Deckers Outdoor, a Goleta, Calif., maker of Ugg boots, slumped 10% on a report that a leading British importer of the company’s footwear had closed its stores.
* Overseas, key stock indexes fell 0.5% in Britain, 1.3% in Germany, 1.6% in France and 2.8% in Hong Kong. Japan’s stock market was closed for a holiday.
