Stocks finished modestly lower Monday, as investors digested mixed earnings reports and a drop in the dollar against the yen after the G7 nations called for China to let its currency appreciate. Dollar weakness supported a shift out of U.S. equities and a safety bid in Treasuries, says Standard & Poor's Equity Research.
The Dow Jones industrial average edged lower 11.13 points, or 0.1%, to 11,336.32, weighed down by weakness in General Motors (GM) and Merck (MRK) despite gains from Disney (DIS). The broader Standard & Poor's 500 index slipped 3.17 points, or 0.24%, to 1,308.11. The tech-heavy Nasdaq composite lost 9.48 points, or 0.4%, to 2,333.38.
Earnings season has brought some price-to-earnings surprises, some analysts say. "Recent earnings news is good, and fewer companies are talking down their profit forecasts," says Thomas McManus, chief investment strategist with Banc of America Securities. "Even so, we are surprised that P/E multiples remain robust for what we see as cyclically enhanced earnings."
Investors were eyeing earnings news Monday. Construction equipment maker Caterpillar (CAT) was modestly lower after reporting a 45% jump in first-quarter profit. Fellow Dow component American Express (AXP) dipped after the financial services company posted a 8% decline in first-quarter profits, slightly better than expected.
Tech bellwether Sun Microsystems (SUNW) was also set to announce quarterly results Monday. Oil giants Chevron (CVX), Exxon Mobil (XOM) and ConocoPhillips (COP) come up later in the week.
Elsewhere in earnings, copier maker Xerox (XRX) was sharply lower after posting first-quarter profit that missed analysts' estimates. Toy maker Hasbro (HAS) was lower after posting a wider first-quarter loss.
In M&A activity, Washington Mutual (WM) was lower after the bank agreed to acquire Commercial Capital Bancorp (CCBI) for $983 million.
Cendant (CD) was higher as the company said it would consider selling its travel distribution services division.
The economic calendar was quiet Monday. Investors were looking toward Federal Reserve Chairman Ben Bernanke's JEC testimony, set for Thursday. The week's docket also includes existing and new home sales, durable orders and consumer confidence, with first-quarter gross domestic product (GDP) and employment cost index (ECI) out on Friday. Meanwhile, the Fed's Beige Book Wednesday could foreshadow the chairman's remarks, says Action Economics.
In the energy markets, June West Texas Intermediate crude oil futures closed down $1.84 at $73.33. Profit-taking and hedge fund selling drove the decline, says S&P Equity Research.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 34 points, or 0.55%, to 6,098.7. Germany's DAX index edged lower 15.66 points, or 0.26%, to 6,079.09. In Paris, the CAC 40 index dropped 30.94 points, or 0.59%, to 5,221.44.
Asian markets finished sharply lower. Japan's Nikkei 225 index tumbled 489.56 points, or 2.81%, to 16,914.4. In Hong Kong, the Hang Seng index fell 206.48 points, or 1.22%, to 16,705.67. Korea's Kospi index slid 20.37 points, or 1.4%, to 1,430.94.
Prices for 10-year Treasury notes rose to 96-09/32 with a yield of 4.99%, while 30-year bonds climbed to 91-11/32 for a yield of 5.06%.