Investors stick
to sidelines

NEW YORK » Stocks dipped lower yesterday despite a sharp drop in oil prices and new strength in the dollar as investors worried about the market's ability to hold its gains after last week's rally.

Investors hoped the new week would extend an advance forged on mostly positive fourth-quarter earnings reports and reassuring economic data. Instead, yesterday's light trading meant that many players kept to the sidelines, unsure if the rally had staying power, particularly in light of the market's poor performance in January.

"The question now is whether last week was just a technical bounce, or if there's something here that we can trade on to the upside," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "So today, you have people waiting to see whether these gains stick."

The Dow Jones industrial average fell 0.37, essentially unchanged, to 10,715.76 after a 123-point gain Friday.

Broader stock indicators also lost ground. The Standard & Poor's 500 index was down 1.31, or 0.11 percent, at 1,201.72, and the Nasdaq composite index lost 4.63, or 0.22 percent, to 2,082.03.

There was no catalyst to keep buyers in the market yesterday. President Bush released his $2.57 trillion budget proposal, slashed spending across a wide swath of government programs, but it also included a record deficit.

Even a new three-month high for the dollar and a sharp drop in crude oil futures failed to move stocks. A barrel of light crude closed at $45.28, down $1.20, on the New York Mercantile Exchange.

Last week's substantial move higher was broad-based, with only technologies shares lagging somewhat due to concerns about weak corporate capital spending. Investors were cheered by reports that pointed to economic growth healthy enough to sustain stock prices but slow enough to avoid inflation issues.

The dearth of news yesterday led to very little movement in the indexes. They blipped higher after Bush released the budget, then settled back down again for most of the session. A move downward in afternoon trading, mirroring a late-day trend seen in much of January, also failed to sustain itself.

In corporate news, the Wall Street Journal reported that an external panel monitoring the safety of Merck & Co.'s Vioxx arthritis drug had early data showing health issues -- increasing concerns that the expected wave of litigation against the company would be successful.