Investors take profits after last week's gains
NEW YORK » Investors sold stocks moderately lower yesterday, ending a five-day rally as rising oil prices and disappointing results from Lowe's Cos. raised concerns about a slowdown in consumer spending.
Lowe's, the nation's second-largest home-improvement chain after Home Depot Inc., reported second-quarter profit rose 11 percent. However, the company cut its full-year earnings outlook on worries that higher energy prices and a sluggish housing market will curb consumers' willingness to spend.
Wall Street was also troubled by Iran's nuclear ambitions, which sent oil prices up $1.31 to $72.45 a barrel on the New York Mercantile Exchange. Fears that higher crude prices will limit economic growth sent shares of homebuilders and airlines lower.
The pullback came after last week's gains pushed major indexes to three-month highs. With little in the way of corporate earnings reports this week and only two major economic reports due out, investors were hard-pressed to extend the rally.
"In general, people are still pretty spooked by the global situation and the Middle East, and are wondering what kind of legs the market has in the short term," said Phil Dow, director of equity strategy for RBC Dain Rauscher. "There's not much in the way of expectations for the week, but we could be moving toward a platform for a decent rally."
Easing tensions in the Middle East helped drive oil prices lower last week, and trigger a rally on Wall Street. Profit-taking after the weeklong rally came on extremely light volume, typical for a late August day with little market-moving news.
The Dow Jones industrial average dropped 36.42, or 0.32 percent, to 11,345.05. Last week, the Dow rose 2.65 percent.
Broader stock indicators also slid. The Standard & Poor's 500 index lost 4.78, or 0.37 percent, to 1,297.52, and the Nasdaq composite index fell 16.20, or 0.75 percent, to 2,147.75.
Bonds rose, with the benchmark 10-year Treasury note falling to 4.82 percent from 4.84 percent Friday. The dollar was mixed against other major currencies, while gold prices rose.
Wall Street focused on oil in the absence of other news. However, one portfolio manager contends the impact of higher crude prices on stocks might just be a speed bump.
"The market and the economy have proved that even if oil moves to $80 a barrel, it won't be a major event," said Stephen Leeb, whose Leeb Capital Management manages some $110 million of assets.