After reaching fresh records Friday, equities took a breather Monday. Traders are awaiting the start of third-quarter earnings season Tuesday
Major equity indexes finished mixed Monday in moderate Columbus Day trading, but the broader market was weak, as investors took profits from last week's big gains. Traders were anticipating third-quarter earnings season, which kicks off Tuesday when aluminum giant Alcoa (AA) releases results.
On Monday, the Dow Jones industrial average was lower by 22.28 points, or 0.16%, at 14,043.73. The broader S&P 500 index slipped from its record closing high Friday to end 5.01 points, or 0.32%, lower at 1,552.58.
The tech-heavy Nasdaq index gained 7.05 points, or 0.25%, to 2,787.37. The Nasdaq got a boost from Business Objects (BOBJ), which soared 15.0% on a takeover bid from SAP (SAP).
The broader market was weak, with 21 stocks declining in price for each 11 that rose on the NYSE. Nasdaq breadth was 17-12 negative. Trading was slow on the Columbus Day holiday, with investors still debating the impact of Friday's solid jobs report.
Roger Volz, a strategist for Swiss American Securities in New York, said in a note Monday that the session's trading action was "book squaring ahead of earnings reports". Volz points out that forecasts compiled by Thomson Financial peg overall third-quarter earnings growth for the S&P 500 at an "anemic" 1.4%. "Should that come to pass, it would be the worst performance since the second quarter of 2002, when earnings rose by the same amount," Volz said.
There were no significant economic releases to move the market on Monday. Traders were awaiting Tuesday’s release of the minutes of the Sept. 18 FOMC meeting at which policymakers cut rates by 50 basis points. The minutes could provide hints on the Fed's interest-rate outlook.
Financial stocks lower as debate rages whether the Federal Reserve will cut rates or leave them unchanged at its Oct. 30-31 policy meeting.
Weakness in energy stocks, prompted by plunging crude oil futures, also weighed on equities Monday. In New York, crude oil for November delivery plunged $2.20 to $79.02 per barrel on profit taking and speculation the U.S. economy is slowing, which could cut down on demand. The International Energy Agency told Reuters that global oil demand is being hit by the global credit squeeze triggered by the U.S. subprime mortgage crisis.
Gold and silver futures fell sharply Monday as the dollar index rose.
Among stocks in the news Monday, enterprise software giant SAP agreed to buy Business Objects in a 4.8 billion euro deal.
Transport outfit Ryder System Inc. (R) cut its third quarter earnings guidance from $1.20 to $1.23 per share to $1.12 to $1.14.
Merrill Lynch (MER), which Friday said it expects a third quarter loss of up to 50 cents per share, was reportedly downgraded by a Credit Suisse analyst from outperform to neutral.
United Industrial Corp. (UIC) agreed to be acquired by Textron Inc. (TXT) for about $1.1 billion or $81 per share.
European equity indexes finished lower Monday. In London, the FTSE 100 index was off 0.83% at 6,540.9. Germany's DAX index fell 0.35% to 7,974.37. In Paris, the CAC 40 index dipped 0.35% to 5,829.4.
Asian markets ended mixed. In Hong Kong, the Hang Seng index edged down 0.22% to 27,770.29. The Shanghai composite index returned from a week-long holiday break to surge 2.53% to 5,692.76. The stock market was closed in Japan.
The Treasury market was closed Monday in observance of Columbus Day.