Stocks dropped on Monday, as a rise in crude oil to above $70 a barrel and some caution ahead of quarterly earnings reports from tech bellwethers this week keeping buying interest limited, says Standard & Poor's Equity Research.
The Dow Jones industrial average fell 63.87 points, or 0.57%, to 11,073.78. The broader Standard & Poor's 500 index was down 3.8 points, or 0.29%, to 1,285.32. The tech-heavy Nasdaq composite lost 14.95 points, or 0.64%, to 2,311.16.
In the energy markets Monday, crude oil rose $1.08 to fresh seven-month highs of $70.40 a barrel, amid worries about supplies in the U.S. and Iran's nuclear plans.
Gold touched a new 25-year high over $606 and silver ran up to 23-year high on concerns about Iran and oil prices, says Action Economics.
As a result, commodities and metals stocks rallied.
Tuesday is heavy with earnings reports from companies such as IBM (IBM
), Johnson & Johnson (JNJ
), Amgen (AMGN
), Merrill Lynch (MER
), Motorola (MOT
), Texas Instruments (TXN
), and Yahoo! (YHOO
In earnings news Monday, Citigroup (C
) posted first-quarter earnings per share of $1.12, vs. $1.04 a year ago, on 21% higher corporate and investment banking revenues. It set a $10 billion stock buyback.
Infosys Technology (INFY
) shares jumped after the company reported fourth-quarter earnings per ADS of 56 cents, vs. 47 cents, on a 30% revenue rise. The company sees 56-57 first-quarter earnings per ADS, and $2.57-$2.61 for fiscal year 2007. It also set a 67-cents per ADS special dividend.
In other news, Tivo (TIVO
) rose after a jury ruled on Apr. 13 in favor of the company in its lawsuit against EchoStar (DISH
). A jury found that Tivo's time warping patent is valid, and EchoStar has been infringing on its intellectual property.
Bausch & Lomb (BOL
) asks U.S. retailers to remove ReNu with MoistureLoc from their shelves temporarily, and recommends consumers switch to another lens care solution until an investigation of reports of fungal keratitis infections concludes.
In economic news, the New York Fed Empire index slowed to 15.8 in April after surging more than 8 points in March to 29.0 (revised from 31.2). Employment was 17.4 from 21.1. Though New York business activity has expanded for 11 straight months, the index is well below forecast, says Action Economics.
A few economic reports are coming Tuesday. The producer price index, an inflation measure, is expected to rebound 0.4%, while the core index increases 0.2% for March. Energy is expected to rebound by 1.5% following the 4.7% drop in February, led by a 5%-6% gain in gasoline prices. Food prices are expected to be flat, although the risk is for some rebound following the surprising 2.7% drop in February.
Housing starts is expected to decline 3.3% to 2.05 million units (median 2.025 mln) for March. While the current level of permits and construction employment provide support for another solid level this month, there is significant risk of a give-back following the warm weather in January and February -- with the only question how big, says Action Economics.
Treasuries posted a solid rally on a friendlier Fed outlook, weaker than expected real sector data, and surprisingly strong foreign capital inflows, reports Action Economics. Additionally, oil through $70 and a decline in equities added to the bid tone in Treasuries which corrected from steep losses last week, say Action Economics.
The 10-year note yield nudged below 5% intraday after the Empire State index plunged, while the NAHB dropped 4 points to 50. News that foreign purchases of U.S. assets accelerated by $86.9 billion allayed fears of a major shift out of Treasuries, says Action Economics.