Stocks fell on Monday after spending most of the day in the black as investors moved past positive news in Iraq to focus on some downbeat corporate reports and the likelihood of an interest rate hike later this week.
The Dow Jones industrial average eased 14.75 points, or 0.14%, to 10,357.09. The broader Standard & Poor's 500 index was off 0.91 points, or 0.08%, to 1,133.52. The tech-heavy Nasdaq composite index fell 5.65 points, or 0.28%, to 2,019.82.
On Tuesday begins the two-day meeting of the Federal Reserve's interest-rate setting arm, the Federal Open Market Committee. By the time the meeting ends on Wednesday, the market expects the FOMC to raise the benchmark federal funds target rate by a quarter percentage point to 1.25%. Market analysts say such a hike is already priced into stocks.
The Fed meeting of course is this week's most important event. But among the other events on the economic news docket on Tuesday, consumer confidence figures for June are expected to show a slight rise from the previous month to 94.5 from 93.2.
Meantime, the earnings calendar is light on Tuesday. Among the companies reporting earnings on Tuesday are greeting card company American Greetings (AM ).
Sending stocks south in late trading on Tuesday in part was news from No. 1 automaker General Motors (GM ) that demand for its automobiles has slowed lately, according to press reports.
Equities had rallied earlier in the session after the U.S.-led coalition in Iraq announced on Monday it had turned sovereignty over to Iraq two days early in a surprise move, apparently to avoid violence by insurgents expected to occur during the transfer of power. Company news on Monday was mixed. Pharma group Watson Pharmaceuticals (WPI ) warned of lower than expected results and blamed sluggish sales of urology and other products.
Wal-Mart (WMT ), the world's largest retailer, lowered expectations for second-quarter sales to a increase of 2% to 4%, citing bad weather and a slow Father's Day. Originally, the company had forecast a 4% to 6% gain.
The European Union temporarily suspended sanctions against software giant Microsoft (MSFT ) as it weighed whether punishment for alleged antitrust activities should be levied before the company had exhausted all its appeals.
Altria (MO ), the name behind Marlboro cigarettes, said the judge in the U.S. Justice Department's $280 billion racketeering suit against major tobacco companies agreed to allow an appeals court to review one of her decisions.
Defense contractor Lockheed Martin (LMT ) scrapped its planned $1.66 billion buy of Titan (TTN ), another defense technology concern, because Titan could not resolve a bribery probe being conducted by the U.S. Justice Department before a recent deadline.
In other merger news, Canada-based electronic publisher Thomson (TOC ) said it agreed to by Information Holdings (IHI ) for about $441 million. The move would apparently expand Thomson's offerings in scientific and health-care publishing.
Of some relief to investors was also news that crude oil is down to two-month lows, with a sustained break of $36 a barrel on the NYMEX exchange, according to Informa Global Markets. Higher energy costs have been acting as a damper on consumer confidence and have been stoking inflationary expectations. The more recent easing in fuel prices should bring an easing of consumer inflation expectations, Informa Global Markets says.
Treasuries finished lower in price Monday, with yields pushing higher, as a key reading on U.S. inflation proved higher than expected, while consumption strengthened markedly. In an economic report released Monday, U.S. personal income climbed 0.6% in May, with consumption spending up 1.0% (both in nominal terms), both a bit better than hoped, according to Informa Global Markets. A closely watched inflation indicator, the PCE index, rose 0.5%, with the core index up 0.2%. Year-over-year, the rise in the headline PCE index was 2.6%, with the core index up 1.6%.
European stock markets closed higher on Monday. London's FTSE 100 index was up 24.60 points, or 0.55%, to 4,518.70 following Allied sovereignty turnover in Iraq two days early. Abbey National was up on takeover speculation.
Germany's DAX index rose 56 points, or 1.40%, to 4,069.35 as GfK research reported German consumer confidence edged up to 5 from in June from 4.8 in May. Some investors were encouraged by sovereignty turnover news from Iraq and the end of the Norwegian oil strike. Bayer, BASF, Lufthansa, and TUI were higher on the oil news. Allianz was higher as the value of its stock investments rose. Munich Re was higher, as was Siemens, after it won a $560 million Australian power plant contract.
In Paris, the CAC 40 index added 29.20 points, or 0.78%, to 3,771.58. Arcelor was lower after saying it would pay $578.5 million to acquire a 61.77% controlling stake in Brazil's steel group CST. Altran was lower although its founders deny an Investir magazine's article saying they plan to sell their stakes in the group.
Asian markets finished higher on Monday. In Japan, the Nikkei index gained 103.66 points, or 0.88%, to close at 11,884.06, but trading was thin as institutional investors stayed sidelined ahead of the key quarterly Bank of Japan survey due out later this week. Shares of Mazda Motor surged nearly 5% after the Nihon Keizai reported that it planned to invest 5 billion yen to boost output of 1.8 liter and 2.3 liter engines used in the popular Atenza sports sedan and Axela sports compact. Japan Petroleum shares plunged over 10% after reports said INPEX, in which Japan Petroleum owns shares, postponed its planned US$1.4 billion IPO expected in July.
In Hong Kong, the Hang Seng index rose 9.08 points, or 0.07%, to close at 12,194.60 index, with index heavyweights such as China Mobile and Hutchison Whampoa trading lower.