Stocks finished with small losses Monday as investors spruced up portfolios before heading into the third quarter. Earlier in the session, investors had responded negatively to a lower than expected read on a key manufacturing report.
In an up-and-down session characterized by portfolio changes on the last day of the quarter, the Dow Jones industrial lost 3.61 points, or 0.04%, to 8,985.44. The broader Standard & Poor's 500 index slipped 1.72 points, or 0.18%, to 974.50. The tech-heavy Nasdaq composite index fell 2.45 points, or 0.15%, to 1,622.81.
Despite the listless final session, the major indexes posted some impressive gains for the second quarter. The Dow advanced 12.4%, the S&P 500 was up 14.9%, and the Nasdaq climbed 21.0%. Now, as investors head into the summer months, they are looking for evidence that the second-half economic rebound is really happening.
On Monday, a manufacturing update initially left hopeful investors somewhat cold. The Chicago purchasing managers index, a regional manufacturing gauge, read 52.5 in June, nearly flat with the 52.2 reading in May. The figure was slightly lower than expectations of 53.0. The Midwest regional update is usually a good indicator of national figures, which are expected Tuesday.
The June ISM index is expected to improve to 50.5 from 49.4, says MMS, if other recent factory gauges are to be believed. However, upside to the ISM number is limited, given ongoing weak trends in "real sector" reports such as durable orders, industrial production and factory employment. News orders are expected to rise to 53.5 from 51.9, production is seen at 53.0 from 51.5 and employment is projected at 43.5 from 43.0.
In company news Tuesday, consumer goods maker Constellation Brands (STZ) will announce first quarter earnings.
American International Group (AIG) will hold a conference call to discuss its plan to buy from GE (GE) its Japanese life insurance business and U.S.-based auto insurance division.
Ford Motor Company (F) will announce June sales results as well.
Investors on Tuesday should also look for fallout from the annual rebalancing of Russell stock indexes.
On Monday, investors got a positive signal for the economy from the world's largest retailer, Wal-Mart (WMT). The company said Monday that sales ended the week of June 27 were encouraging amid summer-like weather. Sales of 1 million copies of the latest Harry Potter book also helped weekly sales for the Dow member. The company has forecast a 2% to 4% rise in June sales at stores open at least a year.
Another Dow component Intel (INTC), rose Monday after Smith Barney upgraded shares to an "outperform" rating from an "in line." Intel was also added to the firm's list of recommended stocks. Another chip maker, LSI Logic (LSI), gained ground after saying that second-quarter sequential revenue would be at the high end of its previously-expected range.
In an effort to expand its organic food line, Dean Foods (DF), the largest U.S. dairy processor, said it plans to buy the 87% of Horizon Organic that it does not already own (HCOW) for $216 million. Dean will also assume $40 million in debt.
Waste hauler Waste Management (WMI) said it will cut 600 full-time jobs and 200 contract workers to reduce costs, saving $50 million annually.
Meanwhile, two more companies have joined the ranks of those paying cash dividends to stockholders. Cendant (CD) plans to begin paying a 7-cent cash dividend in the first quarter of 2004, while PetSmart (PETM) initiated a 2-cent quarterly payout.
U.S. Treasuries finished higher in price as disappointing economic data made stock investors jittery and bonds rebounded from a selloff last week. With possibly lackluster payrolls data coming Thursday, MMS expects upside to Treasuries.
In other economic reports Tuesday, MMS expects construction spending to expand 0.5% in May, ending three straight monthly declines. Private construction spending is expected to expand 0.6% on the back of a 0.4% gain in residential spending and a 1.2% rise in nonresidential spending. Spending on private residential construction dipped in March and April, and a rebound would not be a surprise given the ongoing growth in the housing sector.
European markets finished down on the heels of lower than expected manufacturing data from the U.S.
In London, the Financial Times-Stock Exchange 100 finished down 36.60 points, or 0.90%, to 4,031.20, amid mixed economic data. May U.K. mortgage lending rose at the slowest pace since September, while investors fret over whether the Bank of England will cut rates soon, especially since revised figures showed first quarter GDP was slow.
In Germany, the DAX Index fell 4.08 points, or 0.13%, to 3,220.58, amid news that an auto union strike ended. Separately, retailers said they would benefit from government's planned tax cut. In France, the CAC 40 lost 24.92 points, or 0.80%, to 3,084.10.
In Asia, markets ended lower. Japan's Nikkei index ended Monday down 0.23% at 9,083.11, though investors bid up tech stocks. Exporters like carmakers Honda and Toyota lost ground. In Hong Kong, the Hang Seng index slipped 80.09 points, or 0.83%, to 9,577.12.