Major U.S. stock indexes closed lower Monday, depressed by profit taking after Friday's stock market rally in the first session of the New Year. But the broader market rose on strength in automakers, homebuilders, and energy producers, sparked by a better than expected report on November construction spending and news that President-elect Barack Obama plans $300 billion in tax cuts for individuals and businesses.
On Monday, the 30-stock Dow Jones industrial average finished lower by 81.80 points, or 0.91%, at 8,952.89. The blue-chip benchmark was weighed down by weakness in components AT&T (T) and Verizon Communications (VZ) following an analyst downgrade of their shares.
The broader S&P 500 index fell 4.35 points, or 0.47%, to 927.45. The tech-heavy Nasdaq composite index shed 4.18 points, or 0.26%, to 1,628.03.
But activity in the broader market was positive. On the New York Stock Exchange, 21 stocks rose in price for every 10 that fell. The ratio on the Nasdaq was 15-13 positive.
Automakers closed out their worst year in the last 15 years by reporting dismal December sales. General Motors (GM) reported a December sales decline of 31%, year-over-year, which was somewhat better than expected. Ford Motor Co. (F) reported sales down 32% from a year earlier and Honda (HM) reported a 35% drop. Chrysler reported December sales plunged 53%, year-over-year.
The grim numbers underscore how matters went from bad to worse in 2008 for auto makers as jittery consumers stayed out of showrooms. Little improvement, if any, is expected this year. The entire industry, including Japan's Toyota and Honda, is now reeling from the spiraling effects of the U.S. housing crisis, tight credit and worries about a lengthy recession.
Nonetheless, shares of GM and Ford advanced in Monday's session.
The U.S. dollar index was solidly higher on reports that the European Central Bank and Bank of England were on the verge of cutting interest rates. Bonds were sharply lower amid worries the U.S. Treasury will have to borrow heavily this year.
Oil stocks were higher in conjunction with a rise in crude oil futures. Gold futures were lower.
In economic news Monday, U.S. construction spending fell 0.6% in November from a 0.4% decline in October (upwardly revised from -1.2% before). September was also revised higher. The data are much better than the 1.2% drop that markets feared. Sales are down 3.3% over last November. Residential construction spending declined 4.1% from the preceding month and is down 22.8% year-over-year. Nonresidential spending rose 1.0% from October and is up 9.2% year-over-year. Private spending fell 1.5% month-over-month and is down 7.4% over last November. Public spending rose 1.4% and is up 7.9% year-over-year.
"While only one month of data, the construction report was better than expected, to give markets some good news entering into 2009," says S&P senior economist Beth Ann Bovino.
On Tuesday, the market will get reports on November factory Orders and January's ISM nonmanufacturing index.
Shares of Apple (AAPL) were higher Monday following various reports that CEO Steve Jobs said he's been afflicted by a hormone imbalance that has caused weight loss. "The remedy for this nutritional problem is relatively simple and straightforward, and I've already begun treatment," Jobs said in an open letter to the Apple community. "But, just like I didn't lose this much weight and body mass in a week or a month, my doctors expect it will take me until late this Spring to regain it. I will continue as Apple's CEO during my recovery."
Apple's board of directors said in a separate statement it supports his actions. There had been widespread speculation Jobs was suffering from cancer.
Shares of JPMorgan Chase (JPM) moved lower Monday after Deutsche Bank analyst Mike Mayo cut his earnings estimates and price target on the stock, citing worsening economic trends that should put additional pressure on the company's loan portfolios.
The New York Times and Wall Street Journal report that Gov. Bill Richardson of New Mexico, President-elect Barack Obama's choice for Commerce secretary, withdrew from consideration for that job, saying a pending investigation into whether his administration gave lucrative contracts to a political donor would have "forced an untenable delay" in his confirmation.
The announcement, just days before the Senate is to begin confirmation hearings for some of Obama's cabinet selections, was a setback for the president-elect, who has assembled his cabinet in near-record time.
President-elect Obama and congressional Democrats are crafting a plan to offer about $300 billion of tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs, according to press reports. The size of the proposed tax cuts -- which would account for about 40% of a stimulus package that could reach $775 billion over two years -- is greater than many on both sides of the aisle in Congress had anticipated. It may make it easier to win over Republicans who have stressed that any initiative should rely more heavily on tax cuts rather than spending.
The largest piece of tax relief in the new plan would involve cuts for people who pay income taxes or who claim the earned-income credit, a refund designed to lessen the impact of payroll taxes on low- and moderate-income workers.
"The Obama administration's planned stimulus program should be successful in stemming some of the bleeding associated with credit restraint and its effect on corporate investment in human, physical, and working capital," wrote Citigroup strategist Tobias Levkovich in a note Monday. "However, some early excitement, which may help pump up stock prices temporarily, will likely fade as the news flow around the underlying economic picture continues to be less than constructive."
Among other companies in the news Monday, Navistar Intl. (NAV) sees $5.10-$5.60 fiscal 2009 EPS, below the current Wall Street view of $5.95. The company noted a weak North American business climate.
Synovus Financial (SNV) expects a fourth-quarter loan loss provision of about $350 million, with an estimated charge-off ratio of about 3.2%. The company said the largest component of these elevated charges relates to Atlanta market residential real estate credits. Synovus also expects to increase its loan loss reserve during the quarter, and says it is assessing its goodwill for potential impairment during the quarter.