Markets & Finance

Stocks End Lower


Stocks ended lower Monday as investors digested a spate of earnings news. Before noon, a bomb scare in Washington, D.C., sent the market reeling, but the light volume session suggested that few investors were panicked into selling. Later in the afternoon, a Dutch teen reportedly admitted to the prank.

The Dow Jones industrial average lost 97.20 points, or 0.95%, to 10,093.67. The Nasdaq Composite index fell 2.38 points, or 0.14%, to 1,753.81. And the broader Standard & Poor's 500 index, meanwhile, was down 8.46 points, or 0.76%, to 1,102.55.

The biggest drag on the Dow was General Electric (GE), which fell on a story in Sunday's New York Times that questioned the quality of its earnings. Olstein Financial Alert Funds' Robert Olstein told the newspaper that the company is going to stumble before the year is out, and that the shares should be valued around $25.

Separately, GE reportedly announced that it will cut 7,000 jobs this year.

Among the companies reporting results Monday, Dow member Citigroup (C) posted lower than expected first quarter EPS of $0.74 vs. $0.71 a year ago on a 4.6% revenue rise.

However, oil stocks rallied as crude oil prices rose to about $24.57 per barrel on the continued political chaos in Venezuela as President Hugo Chavez returned to power after being ousted last week. Concern about a supply shortfall from the country sent oil prices surging early last week.

On Tuesday, Dow members Intel (INTC), Caterpillar (CAT), Coca-Cola (KO), General Motors (GM), and Johnson & Johnson (JNJ) are among the companies scheduled to report earnings.

On the economic calendar, the consumer price index, a measure of inflation at the consumer level, is due out before the market opens Tuesday. S&P MMS expects a 0.5% jump in the CPI for March, though the core should be up a more tame 0.2%. The surge in energy prices should pave the way, and food prices are also expected to show an above-trend gain. But depressed commodity prices, little corporate pricing power, strength in productivity, a strong dollar, and the recent deceleration in wage costs should bode well for inflation trends in the months ahead, says S&P MMS.

In addition, S&P MMS expects a 5.6% drop in U.S. housing starts to 1.67 million unit pace in March. Permits should fall 7.0% to a 1.65 million unit rate. Even though relatively low mortgage rates are supporting the housing market, a return to a more seasonal weather pattern and more aggressive seasonal factors are expected to knock these numbers lower, says S&P MMS.

Treasury Market

U.S. Treasuries closed higher in price, sending yields lower, amid weakness in stocks and the Washington, D.C., bomb scare.

In economic news, U.S. business inventories fell 0.1% in February from a revised 0.1% decline in January (+0.1% previously). That's a little stronger than S&P MMS expected. Sales fell 0.9% after a revised 0.9% gain in January (+0.8% previously). That left the inventory to sales ratios at 1.38 in February and 1.37 in January. These data won't impact Treasuries significantly, says S&P MMS.

In addition, the NAHB Housing Market index held steady at 60 in April. The report continues to reflect a healthy housing market.

World Markets

European markets were higher. In London, the Financial Times-Stock Exchange 100 index closed up 40.40 points, or 0.78%, to 5,201.40. U.K. producer prices rose only 0.1% in March, which reduces concerns that the Bank of England will raise interest rates soon.

In France, the CAC 40 added 34.20 points, or 0.77%, to 4,502.49 after the Bank of France said the economy will grow 0.5% in the second quarter, and probably grew at 0.2% in the first quarter. And in Germany, the DAX Index gained 54.55 points, or 1.05%, to 5,244.20.

In Asia, the markets ended higher. Japan's Nikkei gained 174.32 points, or 1.59%, to close at 11,137.30, supported by exporter shares following a strong finishing in U.S. stocks last Friday on the back of earnings optimism. Overall gains also resulted from momentum in speculative buy-orders for index futures by arbitragers, says S&P.

In Hong Kong, the Hang Seng added 17.50 points, or 0.32%, to close at 10,727.98.


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