It's getting to be a gloomy routine on Wall Street. Stocks finished lower for their fourth consecutive Monday, as falling oil prices and a disappointing housing report outweighed M&A news and a set of analyst upgrades.
The Dow Jones industrial average fell 72.44 points, or 0.66%, to 10,942.11, paced by losses in Alcoa (AA). The broader Standard & Poor's 500 index shed 11.4 points, or 0.91%, to 1,240.14. The tech-heavy Nasdaq composite was down 19.54 points, or 0.92%, to 2,110.42.
Energy and basic materials stocks were among the session's worst performers due to weakness in their corresponding commodity futures, says Standard & Poor's Equity Research. Trading volume fell. NYSE breadth was decidedly negative, with 25 issues declining for each nine advancing. Nasdaq breadth was 22-8 negative.
The Federal Reserve is almost universally expected to pursue a 17th consecutive interest-rate hike at its June 28-29 meeting. Some analysts fear policymakers will go too far in their fight against inflation. "The risk of a policy misstep is real, and we now peg recession odds for next year at no less than 40%," wrote David Rosenberg, North American economist at Merrill Lynch, in a June 19 research report.
A quiet session for major economic releases kept the focus on concerns about economic growth, inflation, and rising interest rates, some analysts say. "It's just a question of investors being quite cautious ahead of the FOMC meeting, ahead of the earnings preannouncements season and also ahead of economic data," says Peter Cardillo, chief market analyst at S.W. Bach.
Bulls were still looking for signs the market has reached a near-term bottom, others say. "A consistent voice from the Fed, which has sent mixed messages recently, would likely aid in restoring confidence that gains could be sustained," says S&P Equity Research.
A disappointing report on the housing sector compounded investors' worries Monday. The National Association of Homebuilders housing index fell to 42 in June, its lowest level in 11 years, after an upwardly revised 46 in May.
Reports on housing starts, leading indicators and durable goods are due later in a light week for economic data. Tuesday's release of May housing starts is expected at 1.88 million units, says Action Economics, and could give stocks a boost.
Declining commodity prices weighed on energy shares, which have a significant weighting in major stock indexes. Oil giants Exxon Mobil (XOM) and Chevron (CVX) were both lower, as July West Texas Intermediate crude oil futures fell 90 cents to $68.98 amid conciliatory comments from Iran.
Meanwhile, deal activity continued to percolate. Nokia (NOK) was modestly higher on news the cell phone maker and Siemens (SI) agreed to merge their mobile-network operations.
Among other stocks in focus, UBS upgraded Intel (INTC) from neutral to buy, but shares in the chipmaker slipped. Fellow Dow member Procter & Gamble (PG) was also modestly lower despite an upgrade from Lehman Brothers.
In other ratings news, Monster.com owner Monster Worldwide (MNST) was higher after Morgan Stanley boosted the stock from "equal-weight/in-line" to "overweight/in-line." Media outfit Playboy Enterprises (PLA) was also up after Bank of America raised its rating on the stock from neutral to buy.
On the downside, Clorox (CLX) was lower after Fitch downgraded the cleaning-products maker from stable to negative.
Shares in Ford (F) rose on reports the automaker expects as many as 11,000 union workers to take early retirement or accept buyouts in 2006. The company reportedly aims to cut as many as 30,000 jobs and close 14 factories in North America by 2012. Rival General Motors (GM) was the Dow's biggest gainer.
In legal news, Vonage (VG) was down sharply on reports that two Verizon (VZ) subsidiaries filed a patent-infringement lawsuit against the Internet phone company.
Fed officials also drew attention Monday. Atlanta Fed President Jack Guynn reiterated an early June speech that was fairly tough on inflation, while Dallas Fed President Richard Fisher told CNBC he doesn't foresee stagflation.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 28.7 points, or 0.51%, to 5,626.1. Germany's DAX index climbed 63.22 points, or 1.18%, to 5,439.23. In Paris, the CAC 40 index was up 34.13 points, or 0.735%, to 4,729.02.
Asian markets finished lower. Japan's Nikkei 225 index edged down 18.99 points, or 0.13%, to 14,860.35. In Hong Kong, the Hang Seng index slipped 73.79 points, or 0.47%, to 15,768.86. Korea's Kospi index sank 10.52 points, or 0.83%, to 1,251.67.
The Treasury market shared in stocks' weakness, but rose from session lows following the weak homebuilder data. The 10-year note slipped in price to 99-27/32 for a yield of 5.14%, while the 30-year bond fell to 89-23/32 for a yield of 5.18%. The Treasury curve remained inverted, with the yield on the 2-year note topping the 10-year by 3 basis points. An inverted yield curve is taken by some forecasters as a sign of impending recession.