Stocks finished lower on Monday as disappointing second-quarter results from financial behemoth Citigroup (C ) dampened recent optimism about corporate earnings. Investors also took profits as the recent rally started to lose steam last week, notes Standard & Poor's MarketScope.
The Dow Jones industrial average fell 65.84 points, or 0.62%, to 10,574.99. The broader Standard & Poor's 500 index was down 6.79 points, or 0.55%, to 1,221.13. The tech-heavy Nasdaq composite lost 11.91 points, or 0.55%, to 2,144.87, amid weakness in semiconductors and biotechs.
In the energy markets Monday, August West Texas Intermediate crude oil settled down 77 cents at $57.32 a barrel. Prices eased as fears of Hurricane Emily dissipated, with virtually no U.S. production likely to be affected, says Action Economics. This said, despite the storm's current weakened status from category 4 to category 1, some fear disruptions at Mexican gulf oil platforms in the coming day or two, says Action Economics. Also, OPEC lowered its fourth-quarter and 2006 demand outlook.
Besides earnings news, this week's big event is Federal Reserve Chairman Alan Greenspan's monetary policy report to Congress on Wednesday and Thursday. On Monday, a note from Greenspan to Congress on the yield curve "conundrum" reiterated his recent JEC testimony that flattening was not a fool-proof sign of economic weakness to come, confirming that the majority of research forecasts call for continued moderate economic growth, according to Action Economics. Moreover, he said that lower long-term rates were "stimulative," though this was caused by a wide range of variables.
Looking ahead to Tuesday, June housing starts are expected to increase 2% to 2.02 million units. Housing activity has oscillated over the last few months at robust levels. Permit data, as well as the NAHB survey, suggest the trend remains strong, although weather could be a drag in the south, says Action Economics.
On the earnings calendar, Tuesday brings results from companies such as Intel (INTC ), Motorola (MOT ), Yahoo (YHOO ), Amgen (AMGN ), Ford (F ), Johnson & Johnson (JNJ ), and Wachovia (WB ).
On Monday, Citigroup (C ) reported second-quarter earnings per share of 97 cents, vs. $1.02 (non-GAAP) a year ago, on 3.3% lower revenue. The financial services giant cited a challenging capital market environment, flattening yield curve, and spread compression across several businesses. Dutch electronics maker Royal Phillips Electronics (PHG ) reported a 3% sales decline, saying weakness in the technology sector continued to hamper results.
Other companies reporting results Monday included IBM (IBM ), 3M (MMM ), and Bank of America (BAC ).
In deal news, Whirlpool (WHR ) offered to acquire Maytag (MYG ) in a cash and stock deal valued at $2.3 billion, including debt assumption, or $17 per share. Whirlpool says the total value of the proposal represents a 21% premium over the price offered by Triton Acquisition Holding. Both Maytag and Whirlpool shares rallied on the news.
Stanley Works (SWK ) made an offer to acquire Facom Tools from Fimalac for about €410 million ($494 million) in cash. Stanley Works shares rose.
Treasuries were lower, pushing the 10-year note yield up to 4.19%. Yields rose into the close after a surprise Greenspan letter to Congress on the low-yield "conundrum" suggested that the Fed Chairman would stick to his guns on reducing policy accommodation in testimony later this week, says Action Economics.
There were no major economic reports on Monday.
European stock markets finished mixed on Monday. London's FTSE 100 index was off 16.6 points, or 0.32%, to 5,214.2 on profit taking and uncertainty about the economy.
Germany's DAX index rose 6.67 points, or 0.14%, to 4,719.17. In Paris, the CAC 40 index lost 10.3 points, or 0.24%, to 4,363.47.
Asian markets closed higher on Monday. In Japan, the market was closed for the Marine Day holiday.
In Hong Kong, the Hang Seng index rose 62.71 points, or 0.43%, to 14,567 led by gains in property stocks. Sentiment for the sector was boosted by a rise in property sales last week and expectations that interest rates will peak soon, says Standard & Poor's MarketScope. Sino Land surged 7% and New World Development climbed 6%.