Closing Market Report
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Dow posts lowest close since mid-May
By Christopher Wang
Associated Press
NEW YORK » Stocks fell yesterday as Delphi Corp.'s bankruptcy filing and lowered outlooks at Northrop Grumman Corp. and Xilinx Inc. set a gloomy tone on Wall Street ahead of the upcoming third-quarter earnings season.
The market extended last week's losses as investors grew anxious for earnings reports to gauge the impact of hurricanes Katrina and Rita, and to get a glimpse of where the economy is headed as companies forecast future results. Stocks took a hit after Northrop said the storms would hurt its profit this year, while chip maker Xilinx pegged its sales below previous targets.
However, "this is the time when you get profit warnings instead of earnings surprises," said John Forelli, portfolio manager at Independence Investments LLC. "Once the reports start flying in next week, you typically get a lot of positive reinforcement from earnings."
But the market received some good news after the close, when aluminum producer Alcoa Inc. posted a profit that beat analysts' forecasts despite pressure from soaring energy costs and lower aluminum prices.
Wall Street had some early support from a $7.5 billion acquisition in the insurance sector and a upgrade at International Business Machines Corp., but the major indexes slipped into negative territory after each losing more than 2 percent last week.
Many traders took the Columbus Day holiday off. At the close of trading, the Dow Jones industrial average lost 53.55, or 0.52 percent, to 10,238.76, its lowest close since mid-May.
Broader stock indicators also fell. The Standard & Poor's 500 index dropped 8.57, or 0.72 percent, to 1,187.33, while the Nasdaq composite index sank 11.43, or 0.55 percent, to 2,078.92.
The U.S. government bond market was closed Monday for the Columbus Day holiday.
Wall Street analysts predict double-digit earnings growth for the third quarter, although estimates have been pared back amid inflation concerns and fears of an economic downturn. More importantly, investors will be focused on expectations for the coming months while interest rates continue to rise and soaring oil and gas prices threaten consumer spending.
Investors are afraid that high materials and energy costs -- crude oil vaulted to more than $70 a barrel following Katrina -- will eat into the latest quarter's profit. But Alcoa, which previously warned of a profit shortfall, said its earnings grew 2.1 percent and beat estimates by 4 cents a share. Alcoa shares, which lost 38 cents to close at $22.66 in regular trading, rose 53 cents in after-hours activity.