Stocks Edge Lower At The Beginning Of A Busy Week
Stocks fell Monday as investors took a pause from a historic rally in September and held back ahead of a busy week of economic and earnings reports. The Dow Jones industrial average dropped more than 90 points in afternoon trading after a report showed factory orders fell slightly more than expected in August, but pending home sales rose a bit more than forecast.
Analysts say the market was due for a pullback following a 10.4 percent gain in the Dow last month. The monthlong rally has come on relatively low volume, a sign that many investors are still waiting on the sidelines.
Doug Roberts, chief investment strategist at Channel Capital Research, said the market has been trading in a broad range over the past six months. And with it approaching the high end of that range, a pullback is natural.
The market has been "alternating between euphoria and despair," Roberts said of the wide trading range dating back to late April, when stocks hit their high for the year.
This week brings a number of potentially important news events for stocks, including the monthly jobs survey on Friday and earnings from Dow component Alcoa Inc. on Thursday, the traditional kickoff to the quarterly earnings season.
In corporate news, France's Sanofi-Aventis launched an $18.5 billion hostile takeover offer for Genzyme Corp. Sanofi-Aventis' previous offer was rejected by Genzyme's board, so it is now taking the offer directly to shareholders. The offer, at $69 per share, is unchanged from Sanofi-Aventis' original offer in July.
Swiss regulators said they will require the country's two biggest banks, Credit Suisse Group and UBS AG, to hold more money in reserve than the amount required under newly agreed upon international standards.
The Dow fell 92.37, or 0.9 percent, to 10,737.31 in late afternoon trading.
The Standard & Poor's 500 index fell 10.42, or 0.9 percent, to 1,135.82. The S&P 500 again came within two points of hitting 1,150. The index has come that close or crossed 1,150 each of the past seven days during trading. However, it has been unable to close above the key level during that stretch.
Mike Shea, managing partner at Direct Access Partners LLC, said optimistic profit outlooks from companies as they report earnings in the next few weeks would "absolutely get us through 1,150."
The Nasdaq composite index fell 27.19, or 1.2 percent, to 2,343.56.
Factory orders fell 0.5 percent in August, slightly worse than the 0.4 percent drop predicted by economists polled by Thomson Reuters. But the drop was largely due to a steep drop in commercial aircraft orders. Excluding transportation, orders rose 0.9 percent.
The number of buyers that signed contracts to purchase homes rose in August by more than expected. The National Association of Realtors pending home sales index rose 4.3 percent, slightly better than the 2.5 percent jump economists predicted.
The housing market remains weak after a home buyer tax credit expired at the end of April. The pending home sales index is 20 percent below where it was just a year ago.
The week's blitz of economic reports and the start of earnings season should provide insight into the economy and help give the market direction. With unemployment still at 9.6 percent, traders will be most closely be watching Friday's monthly jobs report. Investors worry that the economy will continue to muddle along until unemployment drops and private employers start to ramp up hiring.
"As long as the jobs number isn't perfectly awful, the market will take whatever comes in stride," Direct Access Partners' Shea said.
Sanofi-Aventis shares fell 29 cents to $32.83. Genzyme shares rose 14 cents to $71.02.
UBS shares fell 14 cents to $16.98, while Credit Suisse fell 48 cents to $42.76.
About three stocks fell for every one that rose on the New York Stock Exchange where volume came to 491.1 million shares.
Cautious investors continued to pour money into bonds, sending Treasury prices higher and their yields lower. The yield on the 10-year Treasury note, helps set interest rates on loans, fell to 2.48 percent from 2.51 percent late Friday.
(Copyright 2010 by The Associated Press. All Rights Reserved.)
