Stocks finished modestly lower in a volatile session Tuesday, as oil prices continued to drop, an Internet bellwether issued a profit warning, and economic reports came in weaker than expected. Wholesale inflation data suggested the Federal Reserve will probably keep interest rates steady at Wednesday's policy meeting, but most economists believe other inflation indicators are headed higher, says Standard & Poor's Equity Research.
Traders were also weighing news of a military coup in Thailand. Thai Prime Minister Thaksin Shinawatra, currently in New York, declared Bangkok in a "severe state of emergency." In 1997, the devaluaton of the Thai baht preceded a currency crisis in Asia and an economic downturn worldwide.
The Dow Jones industrial average fell 14.09 points, or 0.12%, to 11,540.91, led downward by Alcoa (AA). The broader Standard & Poor's 500 index shed 2.87 points, or 0.22%, to 1,318.31. The tech-heavy Nasdaq composite slid 13.38 points, or 0.6%, to 2,222.37.
NYSE breadth was negative, with 19 issues declining for every 14 advancing. Nasdaq breadth was 18-12 negative.
Oil prices extended their recent losses Tuesday. In the energy markets, October West Texas Intermediate crude oil futures tumbled $2.14 to $61.66 a barrel, near a six-month low, amid expectations for ample supplies.
An unexpectedly soft reading on wholesale inflation was also in focus. The producer price index rose 0.1% in August, while the core PPI, which excludes food and energy, sank 0.4%.
The data could help the Fed justify keeping rates unchanged, some analysts say. "This bodes well for a soft landing and is great news for the stock market," says Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.
Still, the core PPI figure was skewed by discounts in vehicle prices, others note. "The 0.1% figure that would otherwise have printed was about in line with our expectation for core prices outside the vehicle sector," says Goldman Sachs.
Homebuilders' shares dipped after their latest dose of disappointing housing-market news. Housing starts fell 6% to 1.67 million in August, below analyst expectations, while building permits dipped 2.3% to a pace of 1.72 million.
The housing data helped prompted profit-taking ahead of Wednesday's Fed meeting, some analysts say. Investors were taking profits ahead of the upcoming Fed meeting, some analysts say. "Investors fear that if the housing market's decline should accelerate, obviously that would impair consumer spending," says Peter Cardillo, chief market analyst at SW Bach. "That's probably one of the reasons why the market is acting the way it is today."
The Fed meeting highlight's Wednesday's economic calendar, with policymakers expected to stay on the sidelines. Investors will be watching for what, if anything, central bankers say about future interest-rate moves.
Among stocks to watch, Yahoo! (YHOO) was sharply lower after the Internet media company said third-quarter revenue will come in at the bottom end of its forecasts due to a slowdown in auto and financial advertising. Shares of Google (GOOG), eBay (EBAY) and other Internet companies also declined.
On the upside, Target (TGT) was higher after the big-box retailer said same-store sales may rise about 5% this month, at the upper end of management's previous forecast.
Wireless company Motorola (MOT) agreed to buy Symbol Technologies (SBL) for about $3.9 billion, or $15 a share. Symbol Technologies makes such devices as bar-code scanners and handheld computers.
Internet music store Napster (NAPS) was sharply higher after the company said it hired UBS to evaluate strategic alternatives, including a sale or an alliance, after possible suitors expressed interest.
Publisher Dow Jones (DJ) was lower after the company trimmed its forecast for third-quarter earnings, citing declining ad revenue.
Elsewhere, automaker DaimlerChrysler (DCX) said it expects retail shipments to fall by 90,000 vehicles in the third quarter and market share to drop amid declining truck and SUV sales.
Coffee giant Starbucks (SBUX) said it plans to more than double its U.S. stores.
Shares of Sirius Satellite Radio (SIRI) dipped on a report that on-air personality Howard Stern could return to free radio in some capacity.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 58.4 points, or 0.99%, to 5,831.8. Germany's DAX index dropped 52.87 points, or 0.89%, to 5,873.46. In Paris, the CAC 40 index was down 30.97 points, or 0.6%, to 5,115.99.
Asian markets ended mixed. Japan's markets Nikkei 225 index gained 7.35 points, or 0.05%, to 15,874.28.In Hong Kong, the Hang Seng index slipped 40.51 points, or 0.23%, to 17,346.7. Korea's Kospi index edged down 0.35 points, or 0.03%, to 1,373.95.
Treasury yields dove following the soft core PPI data and drop in housing starts. The 10-year note rose in price to 101-03/32 for a yield of 4.73%, while the 30-year bond climbed to 94-14/32 for a yield of 4.86%.