Stocks finished mixed in choppy trading Monday, snapping the recent sell-off even as declining commodities futures weighed on metal and energy shares. Bond yields eased and the dollar strengthened, but inflation concerns persisted ahead of key reports later this week, says Standard & Poor's Equity Research.
The Dow Jones industrial average rose 47.78 points, or 0.42%, to 11,377.95, led by Johnson & Johnson (JNJ) and Wal-Mart (WMT). The broader Standard & Poor's 500 index added 3.26 points, or 0.25%, to 1,294.5%. The tech-heavy Nasdaq composite slipped 5.27 points, or 0.23%, to 2,238.52, its lowest close of 2006.
Some analysts express caution on stocks and bonds. "We think the yield curve should steepen as inflation is priced in, then invert as the Fed gets a handle on it perhaps late this year," says David Malpass, chief global economist at Bear Stearns.
Focus this week is on the April producer price index Tuesday and April consumer price index Wednesday. The closely watched inflation gauges could telegraph the Federal Reserve's future interest-rate plans.
Overall PPI is expected to rise 1.2%, while the core index increases 0.2%, says Action Economics. Also Tuesday, April housing starts are seen holding steady at 1.96 million units. April industrial production is projected to increase 0.7%.
On the economic front Monday, the U.S. Empire State index of regional manufacturing activity fell to 12.4 in May, weaker than expected. Median existing home prices rose 10.3% to $217,900 in the first quarter from the same period last year.
Metal producers Alcoa (AA), Phelps Dodge (PD) and Newmont Mining (NEM) were all lower, as metals futures fell on profit-taking.
Investors were also weighing a soft retail earnings report. Target (TGT) was lower after posting a 12% rise in first-quarter profit, which fell below analyst estimates.
Rival Wal-Mart (WMT), which reports earnings tomorrow, was higher. Other companies set to post quarterly results Tuesday include Hewlett-Packard (HPQ), Home Depot (HD) and Staples (SPLS).
Aerospace contractor Boeing (BA) was lower on a report the company will pay $615 million to settle two cases of alleged procurement improprieties.
Contact-lens maker Bausch & Lomb (BOL) swung sharply higher after the company said it had permanently pulled from the market a solution linked to fungal eye infections.
Online auctioner eBay (EBAY) was lower despite a Supreme Court decision siding with the company in a patent dispute.
In M&A news, Vodafone (VOD) was modestly higher on a report the telecom company may sell its stake in Verizon Wireless to Verizon (VZ), which owns the majority of the operation.
In the energy markets, June West Texas Intermediate crude oil futures fell $2.63 to $69.41 a barrel, after Saudi Arabian Oil Minister Ali Naimi said OPEC's capacity expansions could outpace demand. Energy shares such as Exxon Mobil (XOM) and Chevron (CVX) were lower on the news.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index dropped 70.8 points, or 1.2%, to 5,841.3. Germany's DAX index skidded 59.25 points, or 1%, to 5,857.03. In Paris, the CAC 40 index declined 85.6 points, or 1.66%, to 5,857.03.
Asian markets finished lower. Japan's Nikkei 225 index fell 114.87 points, or 0.69%, to 16,486.91. In Hong Kong, the Hang Seng index tumbled 407.01 points, or 2.41%, to 16,494.84. Korea's Kospi index slid 31.22 points, or 2.16%, to 1,413.98.
Global equity weakness and a reversal in commodities helped boost bonds, says Action Economics. Prices for 10-year Treasury notes were higher at 99-26/32 with a yield of 5.15%, while 30-year bonds rose to 88-18/32 for a yield of 5.26%.