Stocks in U.S. Continue Trading Downward
Updated from 2:21 p.m. EDT
Stocks in New York were falling Monday as prospects unraveled for at least one big proposed merger, and oil prices again charged into uncharted territory.
The
Dow Jones Industrial Average
was off 84 points at 12,974, and the
S&P 500
gave up 6 points to 1408. The
Nasdaq Composite
was losing 14 points to 2463.
Even amid the apparent collapse of an anticipated tie-up between
Microsoft
(MSFT) - Get Report
and
Yahoo!
(YHOO)
, however, Peter Cardillo, chief market economist with Avalon Partners, believes that stocks' broader movements represent "a normal pullback after last week's healthy run-up."
Doug Roberts, chief investment strategist at ChannelCapitalResearch.com, agreed that the market's seeming reaction is probably, in essence, an incidental move. "It's more that everybody doesn't trust what's happening," he said. "They're looking for any excuse they can to take tips under the table. If you were looking to trade something totally on fundamentals, there were as many excuses last week for stocks to go down when they rallied."
Bruce Zaro, chief technical strategist with Delta Global Advisors, agreed. "I think
the merger news is probably as good of an explanation or an excuse as any," he said. "This is pretty typical from what I've seen, that Mondays at least start with some weakness. But certainly I think the market will continue to exhibit this two-steps-up and one-step-back phenomenon."
Zaro added that the "old highs," roughly 1,000 points away on the Dow, are on his radar screen. "The upside from here on out might be a little bit slower than what we've had over the past month or so," he said, tentatively predicting that the current run-up will take several months to unfold. "I would expect this rally to play itself out in fairly dramatically overbought conditions. Right now we're only slightly overbought."
Cardillo further pointed out that the jump in oil was acting as a further drag on the market, and Roberts remarked that the development was "really the key" today. Last week's equities rally, he pointed out, was accompanied by a slide in oil prices.
Crude futures hit a record high of $120.36 earlier, before paring back to a $3.65 gain at $119.97 a barrel. Gold advanced $16.10 to $874.10 an ounce. At the same time, the U.S. dollar yielded 0.6% to the euro at $1.5506 and sank 0.2% against the yen.
The inflation of crude prices, believes Roberts, is demand-driven, and he said that -- barring a "major exogenous supply interruption, not just short-term disruptions" -- it will remain that way. So, eventually, he predicted, a ceiling will be placed on gas prices as people begin to pare back on their gas usage and look to new alternatives. He noted, however, that such changes will probably take awhile to materialize on a grand scale.
As for the M&A news on the corporate front, over the weekend Microsoft announced it had
on its months-long efforts to take out Yahoo!. The software maker said it was willing to sweeten its offer by some $5 billion, to $33 a share, but claimed Yahoo! wanted at least $5 billion more than that.
Regarding Microsoft's prior threats that it would go hostile if Yahoo! didn't accept its original bid, the company decided against that path, believing that Yahoo! would in that case try to make itself unattractive as a buyout target.
On the heels of the news, Yahoo! was downgraded to sell by Citigroup, Soleil Securities and ThinkPanmure. RBC Capital Markets and Stanford Research each slashed their price targets on the stock. Yahoo! shares were plummeting 15.1% to $24.33. Microsoft investors
to the development in the early going, though shares of the Dow component were off 0.6% in recent trading.
Also having a rough day was
Countrywide
(CFC)
a trading day after
Bank of America
(BAC) - Get Report
disclosed it might not assume part of Countrywide's debt in its deal to take out the struggling mortgage lender.
Friedman Billings cut Countrywide to underperform, saying that BofA should abandon the merger entirely, or at least sharply lower the buyout price. On Friday, Standard & Poor's downgraded Countrywide's credit rating to junk. The stock was sinking 15.4%. Dow member BofA was down 1.7%.
As for the day's earnings, gold miner
Goldcorp
(GG)
topped the consensus estimate by 2 cents a share in a quarter that saw gold prices reach record-breaking levels. The company's earnings soared 84% to $229.5 million, or 32 cents a share. Shares bumped up 2.3%.
Entertainment company
Marvel Enterprises
(MVL)
ramped up 8.1% after sailing past first-quarter analyst targets and lifting its full-year guidance. Marvel also announced that its
Iron Man
film took the top spot in its opening weekend, raking in $100.75 million in domestic box-office receipts.
In the red was poultry concern
Pilgrim's Pride
(PPC) - Get Report
, which lost $111.4 million last quarter as it suffered from ballooning feed costs that CEO Clint Rivers blames squarely on "the federal government's deeply flawed ethanol policy." Pilgrim's Pride said its costs for corn and soybean meal have surged $200 million from last year. Shares gave up 1.8%.
Elsewhere,
Apple
(AAPL) - Get Report
added 1.6% on an upgrade to buy at AmTech Research. In more analyst calls, Stifel Nicolaus brought
Google's
(GOOG) - Get Report
price target up $65 to $675, after which the search giant's shares climbed 2%.
Lehman Brothers shaved down
Nortel's
(NT)
price target, pressuring the stock by 2.1%, but lifted its price targets on mining-equipment makers
Joy Global
(JOYG)
and
Bucyrus International
(BUCY)
. Shares advanced 2.3% and 3.7%, respectively.
On the data side, the Institute for Supply Management said its April nonmanufacturing index came in at 52, indicating expansion -- albeit slight -- for the first time in four months. Improved employment, among other things, buoyed the reading, which has a break-even point of 50. Economists were projecting slight contraction to 49.1.
Treasury prices were lately edging higher again. The 10-year note rose 4/32 in price to yield 3.84%, and the 30-year bond ticked up 2/32 in price, yielding 4.57%.
Markets abroad were mixed. Hong Kong's Hang Seng Index slipped 0.2%. In Europe, Germany's Xetra Dax was up 0.1%, and the Paris Cac dipped by roughly that same amount. Tokyo's Nikkei 225 and London's FTSE 100 were each closed for a public holiday.