Stocks closed narrowly mixed as profit taking bit into earlier gains. Major indexes had moved solidly higher earlier in the session on news that troubled bank Washington Mutual (WM) may be close to getting an extra $5 billion in capital. Oil stocks were higher as heating oil, gas oil soared on cold European weather. Automakers General Motors (GM) and Ford (F) were rebounding from Friday's slump.
Also on Monday, tech stocks were in focus, as Microsoft (MSFT) and Yahoo (YHOO) wrangled over Microsoft's offer to buy its rival. Yahoo said Monday it is not opposed to the deal but wants a better offer from Microsoft, which had proposed buying Yahoo for $41 billion.
Bond prices fell, while the dollar index rose. Gold and crude futures rose sharply.
On Monday, the Dow Jones Industrial Average gained 3.01 points, or 0.02%, to finish the session at 12,612.43. The S&P 500 index added 2.14 points, or 0.16%, to close at 1,372.54. The Nasdaq composite index fell 6.15 points, or 0.26%, to end at 2,364.83.
On the New York Stock Exchange, 17 stocks traded higher for every 14 that fell, while on the Nasdaq, the ratio was 15-14 negative.
S&P MarketScope says it sees indications that some traders have discounted a U.S. economic slowdown and weak first-quarter earnings reports. The market is awaiting Tuesday’s release of the minutes from the March FOMC meeting for indications of what might happen at the Fed’s Apr. 29-30 meeting.
The first quarter earnings season kicked off after the close of trading Monday when aluminum giant Alcoa (AA) reported quarterly results. Alcoa posted net earnings of 37 cents per share, vs. 75 cents one year earlier, on flat revenues. Income from continuing operations, excluding restructuring and tax impacts, was 44 cents per share, below analysts' average forecast of 50 cents.
The shares fell 4% in Monday’s regular session, and declined an additional 1.9% in after-hours trading.
Overall, analysts are increasingly pessimistic about the first quarter. According to Reuters Estimates, analysts now predict S&P 500 companies earnings to fall 11.8% from a year ago, worse than the 8.1% drop they predicted a week ago. Earnings at financial firms are projected to plunge 61%.
Coal producer Arch Coal (ACI) disappointed Wall Street Monday with its forecast of 2008 EPS of $2.00-$2.50, vs. the Street consensus estimate of $2.42.
Energy futures surged for the second consecutive session as speculators crushed short-sellers, reports S&P MarketScope. Some dealers warned the market could go down as quickly it has risen the past few days because trading, for the most part, is not based on fundamentals. NYMEX May WTI crude oil rose $2.86 to $109.09 per barrel.
Washington Mutual is reportedly considering a deal with private equity firm TPG and other investors, who would invest $5 billion in the bank. The deal would give WaMu -- stung by the mortgage crisis -- extra capital, but it would also dilute existing shareholders' stakes in the firm, the Wall Street Journal reports.
Among other stocks in the news Monday, Nestle (NSRGY.PK) agreed to sell 74 million shares of Alcon (ACL) shares to Novartis NVS" primary="true" />) for $143.18 per share. Upon closing, pending regulatory approvals, Novartis would own 25% of Alcon’s shares. The deal also gives Novartis the option to buy Nestle's remaining 52% Alcon stake at $181 between January, 2010, and July, 2011.
Apple (AAPL) was upgraded by Thomas Weisel analysts from marketweight to overweight.
UBS (UBS) was reportedly upgraded from neutral to buy by Merrill Lynch analysts.
Discover Financial Services (DFS) made a deal to acquire the Diners Club International business from Citigroup C for $165 million.
Alliant Techsystems (ATK) says it won a $415.6 billion military contract.
Major European indexes were higher Monday. In London, the FTSE 100 index was up 1.14% to 6,014.80. Paris' CAC 40 index rose 0.89% to 4,944.60, and Germany's DAX index added 0.85% to 6,821.03.
Most stock indexes fell in Asia, with Hong Kong's Hang Seng index off 2.44% to 26,887.28 and mainland China's Shanghai Composite up 0.89% to 5,319.86. Japan's stock market was closed.
Treasuries fell sharply Monday, reversing the rally on Friday that was prompted by a reported drop in March nonfarm payroll jobs. The 10-year note fell 25/32 to 99-16/32 for a yield of 3.56%. The 30-year bond slid 32/32 to 100-04/32 for a yield of 4.37%.
Since late March, the bond market has been driven by a tug of war, according to S&P MarketScope: The bulls cite ongoing weak economic data that suggest the economy is slipping into a recession, while the bears argue a recession has been fully discounted.