Stocks finished mixed Monday, as oil prices receded from recent highs but concerns over Mideast violence persisted. A Dow member posted disappointing earnings growth, while another issued upbeat second-quarter guidance. Caution ahead of this week's inflation data and remarks from Federal Reserve Chairman Ben Bernanke was also dampening sentiment, says Standard & Poor's Equity Research.
The Dow Jones industrial average edged up 8.01 points, or 0.07%, to 10,747.36. The broader Standard & Poor's 500 index slipped 1.71 points, or 0.14%, to 1,234.49. The tech-heavy Nasdaq composite inched higher 0.37 points, or 0.02%, to 2,037.72.
NYSE breadth was negative, with 19 issues declining for every 14 advancing, while NASDAQ volume was 19-11 negative. Volume declined on both exchanges.
The recent short-term downtrend may have further to go, some analysts say. "Obviously, geopolitical events have been taking center stage, along with a number of earnings disappointments," notes Mary Ann Bartels, chief U.S. market analyst at Merrill Lynch, in a research report. "The very short-term momentum indicators still have not fully corrected their overbought readings, so the markets will likely need more time to consolidate."
Any upturn should present an opportunity for investors to lighten their exposure to stocks, others say. "Equity market corrections tend to take place in two stages," observes Steven Ricchiuto, chief U.S. economist at ABN Amro. "The second downleg tends to be the larger of the two steps and should in this instance pull the broad market index down to at least 1,140 before investors again find value in the market."
Investors continued to weigh international tensions Monday. Over the weekend, conflict between Lebanon and Israel continued to escalate. U.K. Prime Minister Tony Blair called for a peacekeeping force and President George W. Bush used an expletive to tell Blair that the United Nations should lean on Syria to stop the aggression by Hezbollah militants.
Still, there was at least one indication a pause to the violence may be in sight. An Israeli official reportedly said Israel's military objectives in Lebanon would be accomplished within days.
Traders were also focusing on a lackluster earnings season. Citigroup (C
) was lower after the financial giant reported a 4% rise in second-quarter profit, below Wall Street expectations.
Fellow Dow member McDonald's (MCD
) was higher after issuing bullish second-quarter guidance and reporting a 5.9% surge in June same-store sales, stronger than expected.
Another Dow component gaining was Boeing (BA
). Shares rose on news the aerospace company reached a $4.9 billion deal to provide 20 of its 777 commercial airliners to Qatar Airways.
Among other stocks in the news, toymaker Mattel (MAT
) was sharply higher after swinging to a $37.4 million second-quarter profit.
Swiss pharmaceutical maker Novartis (NVS
) edged up after posting 4% higher second-quarter profit on higher sales of its cancer and heart drugs.
Shares in EMC (EMC
) continued their recent decline after Deutsche Bank lowered its share-price estimate for the stock by 14% to $9.50. On Friday, the data storage provider said second-quarter earnings fell nearly 5%.
Meanwhile, Qualcomm (QCOM
) was modestly higher after UBS lifted its recommendation on telecom the stock from neutral to buy.
Computer maker Apple (AAPL
) was higher on a report the company's shares could rebound in the next year amid rising interest in Macintosh computers.
In M&A activity, copper producer Phelps Dodge (PD
) and Canada's Inco (N
) raised the cash portion of their offer for Canadian metals company Falconbridge (FAL
), in a sweetened bid valued at $41 billion.
On the economic front, industrial production jumped 0.8% in June, stronger than expected, after a 0.1% increase in May. Separately, the Empire State index dropped to 15.6 in July after a reading of 29.0 in June.
Looking ahead, Fed Chairman Bernake's testimony to the Senate Banking Commitee on Wednesday is the week's key economic event. Markets will be watching for clues on whether the Fed will keep raising interest rates at its Aug. 8 meeting, though it's unclear how much Bernanke will reveal.
Closely watched inflation measures should also draw attention this week. A June reading of the producer price index is set for Tuesday, while the consumer price index follows Wednesday. The National Association of Home Builders' housing-market index and the weekly ABC consumer-sentiment index are also due Tuesday.
In the energy markets Monday, August West Texas Intermediate crude oil futures fell $1.73 to $75.30, after a report that Israel plans to halt its military operation soon. On Friday, crude futures touched an all-time intraday high of $78.40.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index slipped 6.6 points, or 0.12%, to 5,701. Germany's DAX index edged lower 5.26 points, or 0.1%, to 5,416.96. In Paris, the CAC 40 index was down 30.71 points, or 0.64%, to 4,750.08.
In Asia, the Japanese and South Korean markets were closed for public holidays. In Hong Kong, the Hang Seng index declined 70.89 points, or 0.44%, to 16,064.82
Treasuries held steady Monday after the strong industrial production data and tepid Empire State index. The 10-year note was little changed at 100-14/32 for a yield of 5.06%, while the 30-year bond rose in price to 90-27/32 for a yield of 5.1%.