Stocks extend decline on fears of correction
NEW YORK » Wall Street extended its decline yesterday as concerns about a market correction offset investor optimism that acquisition activity is on pace to set a record this year.
The $45 billion buyout of electric utility TXU Corp. injected confidence into the market that merger and acquisition activity could surpass last year's record $4 trillion level. The deal, led by a consortium led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group, would go down as the largest leveraged buyout in U.S. history.
Other deals included Station Casinos Inc., which agreed to be bought by a private equity firm started by the company's founding family. Temple-Inland Inc., a conglomerate that offers everything from packaging material to financial services, plans to separate itself into three standalone public companies.
However, stocks were unable to sustain gains amid speculation that the market may be in for a correction. Hanging over the market is a lack of catalysts that could propel stocks forward, especially ahead of an expected downward revision of fourth-quarter gross domestic product to be released tomorrow.
"Despite the buyout news, we're seeing the broader market a little concerned that we've had such strength without a correction," said Peter Dunay, an investment strategist with New York-based Leeb Capital Management.
The Dow Jones industrial average fell 15.22, or 0.12 percent, to 12,632.26. The index has had 31 record closes since the beginning of October, and is up about 8 percent in that time.
Broader stock indicators also fell. The Standard & Poor's 500 index was down 1.82, or 0.13 percent, at 1,449.37, and the Nasdaq composite index fell 10.58, or 0.42 percent, to 2,504.52. The Nasdaq was the only index that finished last week in positive territory, while the Dow and S&P dipped.
The Russell 2000 index of smaller companies fell 2.95, or 0.36 percent, to 823.69.
Advancing issues barely outpaced decliners on the New York Stock Exchange, where consolidated volume came to 2.82 billion shares, up from 2.59 billion Friday.
Bonds continued to rise from last week's sell-off, with the yield on the benchmark 10-year Treasury note falling to 4.63 percent from 4.68 percent late Friday.
A warning from former Federal Reserve Chairman Alan Greenspan about a possibility of a recession by year's end helped bonds recover. Treasurys are more in favor during times of recession as interest rates cuts are used to stimulate the economy.
The dollar was mixed against other major currencies, while gold prices rose.
A barrel of light sweet crude rose 25 cents to $61.39 .