Falling Dollar Trips Stocks, Bonds

Some solid retail shopping estimates can't lift the averages.
Author:
Publish date:

Updated from 4:09 p.m. EST

Stocks eased Monday despite some bullish holiday shopping estimates, as weakness in the dollar and Sunday's tidal wave tragedy in South Asia made for a somber start to the year's final week.

The

Dow Jones Industrial Average

fell 50.99 points, or 0.47%, to 10,776.13, weighed down by a decline in the dollar that also sent the 10-year Treasury note 19/32 lower in price to yield 4.29%. The

S&P 500

lost 5.21 points, or 0.43%, to 1204.92, while the

Nasdaq

dropped 6.4 points, or 0.3%, to 2154.22.

The Dow and S&P 500 had traded at 42-month highs at the start of the session before dropping into the red, and all three indices ended near their session lows.

Volume was light following the holiday weekend. The

NYSE

saw 921 million shares change hands, with decliners beating advancers by a ratio of 5 to 3. Volume on the Nasdaq was 1.47 billion, with decliners outpacing advancers 9 to 7.

Against the dollar, the euro rose as high as $1.3548 in early trading, setting a new all-time record. The dollar also fell against the yen.

Stocks were little moved by

Wal-Mart

(WMT) - Get Report

, which estimated December same-store sales growth in the middle of its previous 1% to 3% range, despite strong results on Sunday. The discount chain reported brisk sales of gift cards and said its best geographic region was the West. Wal-Mart gained 24 cents, or 0.5%, to $52.79.

Oil futures closed down $2.86 to $41.32 a barrel, its lowest level in almost four months. The sharp decline is reflective of some recent longer-term forecasts calling for a milder-than-normal U.S. winter. Oil is still set to close the year up well over 30%, even after its two-month swoon from above $55 a barrel in late October. The Philadelphia Stock Exchange oil index fell over 2% today.

"Oil continues to slide lower, but the market isn't trading off of it right now," said Brian Williamson, an equity trader with Boston Company Asset Management. "The biggest thing I can say is that volumes are abysmal, and you might be getting higher volatility from the lack of trading."

Some on the Street held out for more gains around the turn of the year.

"The last week of the year has historically ended on a positive note, with buying continuing," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "You have a lot of money chasing stocks, hopefully carrying into the first quarter of the new year."

Millions of people remain homeless after an earthquake measuring 9.0 in magnitude erupted in the Indian Ocean just north of Indonesia early Sunday, spawning a massive tsunami that flooded coastal areas of at least eight countries. The

Associated Press

puts the current death toll at around 23,000, with most of the life lost in Sri Lanka, India, Thailand and Indonesia. Thousands remain missing throughout the region.

Property insurers traded lower, although experts are still a long way from counting up the damage in the disaster's wake. State Department and World Bank officials are reportedly devising a strategy to get aid to the region, with the expected sums expected to reach into the tens of billions of dollars.

The tragedy marked a bleak conclusion to a holiday season that might otherwise have shaped up well, at least from a commercial perspective. According to MasterCard, American consumers spent as much as 8.1% more in the pre-Christmas run-up than they did a year ago, with most of the buying focused on luxury housewares and apparel.

In addition to chain-store merchandise results, the MasterCard survey is intended to embrace both online and gift-card spending, receipts that are only partially counted in a survey by the National Retail Federation. That group is calling for a 4.5% rise in year-over-year outlays.

The calls supported the retail sector, with

Kohl's

(KSS) - Get Report

,

Best Buy

(BBY) - Get Report

,

Target

(TGT) - Get Report

and

Sears

(S) - Get Report

all posting modest gains for the day.

While the bigger-picture retail outlook was rosy, the optimism is not shared by hundreds of

Toys R Us

(TOY)

employees who were reportedly fired yesterday at a number of East Coast stores. The

New York Post

said workers at about 15 outlets received pink slips yesterday as the retailer struggles to streamline ahead of an effort to sell the domestic chain. According to the article, Toys R Us will close its store in Union Square within five weeks, leaving a Time Square outlet the chain's only Manhattan outpost. Toys R Us dipped 11 cents, or 0.5%, to $19.88.

Also hurting was

Sharper Image

(SHRP)

, which Monday slashed fourth-quarter earnings guidance because of weaker-than-expected overall holiday sales. The gadget chain expects to earn 94 cents to 99 cents a share in the period, well below the $1.31 a share consensus compiled by First Call. The company sees fourth-quarter sales up 7% to 9% from a year ago, compared with a previous estimate for a 15% to 18% gain. Shares dropped $4.18, or 18%, to $18.96.

Elsewhere,

Amazon.com

(AMZN) - Get Report

said electronic items outsold books on its Internet sites this season, led by DVDs and video games. The company said 2004 was its best holiday to date with 2.8 million units ordered on its peak day. Amazon rose $3.32, or 8.5%, to $42.25.

Among analysts actions Monday, CIBC said

Pfizer

(PFE) - Get Report

won a victory last Thursday when the FDA stopped short of pulling Celebrex from the market. And UBS predicted

Motorola

(MOT)

is likely to edge out

Alcatel

(ALA)

in the competition for

Verizon's

(VZ) - Get Report

next big fiber-optic residential contract.

Piper Jaffray reiterated its outperform rating for

Apple

(AAPL) - Get Report

ahead of the MacWorld conference scheduled for Jan. 10, where the company is expected to unveil new products. Despite the news, Apple fell 85 cents, or 1.3%, to $63.16.

Thanks to holiday sales and aggressive marketing,

Sirius

(SIRI) - Get Report

said it met its year-end goal of 1 million subscribers to its satellite radio service. Shares finished up 15 cents, or 1.9%, to $8.10.

Overseas markets were little changed in light of post-Christmas trading. London markets were closed for Boxing Day, while Germany's Xetra DAX was unchanged at 4251. Japan's Nikkei was virtually unchanged overnight at 11,362, while Hong Kong's market was also closed for a holiday.