Investors shrug off factory orders gain
NEW YORK » Wall Street retrenched yesterday, closing sharply lower as investors showed their cautious side and cashed in profits from the market's best week in nearly five years. The Dow Jones industrial average fell more than 100 points.
Given the scope of last week's gains, a pullback yesterday wasn't unexpected and perhaps reflected the normal ebb-and-flow of trading.
"It's not like all of our problems went away because the market was up a couple of days last week. There are still some problems hanging over," said Tom Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles.
He said investors chiefly remained concerned about the labor market -- given the huge effect of consumer spending on the economy -- and on the feasibility of efforts to aid struggling bond insurers.
The session's move lower continued even after a U.S. Commerce Department report showed that orders at U.S. factories rose by 2.3 percent in December -- the biggest increase since July. Analysts had been expecting a 2 percent increase after a 1.7 percent gain in November.
Downgrades of credit card companies American Express Co. and Capital One Financial Corp. also weighed on stocks yesterday.
The Dow fell 108.03, or 0.85 percent, to 12,635.16. Broader stock indicators also lost ground. The S&P 500 index fell 14.60, or 1.05 percent, to 1,380.82, and the Nasdaq fell 30.51, or 1.26 percent, to 2,382.85. The Russell 2000 index of smaller companies fell 7.04, or 0.96 percent, to 723.46.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange. Consolidated volume came to 3.38 billion shares yesterday, down from 4.51 billion shares Friday.
The Dow is 10.8 percent below its record close of 14,164.53 from Oct. 9, but is up 8.6 percent from the 15-month lows it hit in January. The Federal Reserve's second interest-rate cut in about a week helped boost stocks last week.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.64 percent from 3.60 percent late Friday.
The dollar slipped against most other major currencies, and gold prices also fell.
Light, sweet crude oil rose $1.06 to settle at $90.02 a barrel on the New York Mercantile Exchange.
In corporate news, Google Inc. said Sunday that Microsoft Corp.'s $42 billion bid for Yahoo Inc., announced Friday, amounts to an attempt to gain illegal control over the Internet. Microsoft Chief Executive Steve Ballmer said yesterday the proposed deal would leave the software maker as a "strong No. 2 competitor" against Google.
Google, whose stock is down about one-third from its high of $741.79 on Nov. 6, fell $20.47, or 4 percent, to $495.43, Dow component Microsoft dipped 26 cents to $30.19, and Yahoo rose 95 cents, or 3.4 percent, to $29.33.
American Express, one of the 30 stocks that make up the Dow industrials, fell $1.94, or 3.9 percent, to $47.66, while Capital One fell $4.32, or 7.6 percent, to $52.65.
Wendy's International Inc. fell $1.25, or 5 percent, to $23.93 after reporting its fourth-quarter earnings rose 42 percent.