Stocks Fail to Hold Gains

Wall Street tries for new records, but the rally comes up short.
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Updated from 4:25 p.m. EDT

Blue-chip stock measures had their sights set on records for much of the session Wednesday, but a sudden southward detour late in the afternoon derailed the rally.

When the final bell rang, the

Dow Jones Industrial Average

had a loss of 14.30 points, or 0.11%, at 13,525.65. The

Nasdaq

surrendered 10.97 points, or 0.42%, to 2577.05, and the

S&P 500

slipped 1.84 points, or 0.12%, to 1522.28.

Earlier, the Dow touched an intraday record high of 13,609.76, and the S&P reached 1532.43. The Nasdaq went to just under 2601.

Breadth weakened from the previous session while volume ramped up. About 2.91 billion shares changed hands on the

New York Stock Exchange

, with advancers beating decliners by a 6-to-5 margin. Volume on the Nasdaq reached 2.03 billion shares, and winners outpaced losers 8 to 7.

The market was enjoying fairly solid gains until right after 2 p.m., when the major U.S. averages tumbled. A warning from former

Federal Reserve

Chairman Alan Greenspan that Chinese equities could be gearing up for a sharp pullback appeared to be at least partly responsible for the slide.

Both during his time at the central bank and since he left the Fed early last year, Greenspan has shown considerable ability to drive down shares anytime he even hints that investors should exercise restraint, beginning with his famous caution against "irrational exuberance" in late 1996.

The lower close was a disappointment for the market watchers who wanted to see the broad S&P index settle at a new all-time high, especially considering that for a large part of trading it seemed to be a foregone conclusion.

Each day this week, the S&P has pushed above its best finish of 1527.46 set in March 2000, but it hasn't been able to stay there. On Tuesday, the measure slipped nearly 1 point to 1524.12.

As has been the case for several weeks, mergers and acquisitions propped up the market before it ultimately fell back. Shares of

Alcan

(AL) - Get Report

rose 6% to end at $85.89 after published reports said the Canadian aluminum company has held merger talks with Australia's

BHP

(BHP) - Get Report

.

Following the last close, Alcan said it was urging shareholders to reject the $27 billion hostile offer from

Alcoa

(AA) - Get Report

and suggested it was seeking a different partner.

Among other deals in the news,

Crescent Real Estate Equities

(CEI) - Get Report

reached an agreement to be bought by a unit of

Morgan Stanley

(MS) - Get Report

in a $6.5 billion arrangement. A large chunk of the total value includes assumed debt. Shares of Crescent ended higher by 3.2% at $22.31.

Elsewhere, shoe peddler

Payless ShoeSource

(PSS)

said it will acquire

Stride Rite

(SRR)

, the shoemaker, for roughly $800 million, or $20.50 a share. Stride Rite soared nearly 31% to $20.21 after the takeover was announced.

Edgar Peters, chief investment officer with Pan Agora, said that M&A activity has been good for individual stocks, but will not benefit the entire market over the long term.

"This isn't the environment where you'd want to see the market rallying to new highs," said Peters . "There's a certain amount of resistance at this point, and there aren't too many reasons to believe that everything is wonderful. Most of what's going on now is being tied to M&A. That's a liquidity issue and it is not tied to fundamentals, which are poor."

Several retailers were reporting earnings, including

Target

(TGT) - Get Report

. The chain retailer posted a first-quarter profit of $651 million, or 75 cents a share, up 18% from the previous year. Results beat the Thomson First Call average consensus of 71 cents a share, although revenue came in slightly below estimates. Target gained 56 cents, or 1%, to finish at $58.60.

Additionally,

Wet Seal

(WTSLA)

topped first-quarter estimates by a slim margin. However, it indicated that second-quarter profits could miss the consensus. Still, Wet Seal was higher by 35 cents, or 6.3%, to $5.93.

Dillard's

(DDS) - Get Report

posted a 30% decline in first-quarter earnings, and the stock ended down $2.60, or 6.6%, at $37.05.

As for commodities, energy prices were stronger in the wake of the Energy Department's weekly inventory report, which showed a rise of 2 million barrels in crude inventories. Gasoline stocks added 1.5 barrels, and distillate stocks rose by 500,000 barrels.

The new front-month July crude contract climbed 26 cents to $65.77 a barrel, and gasoline tacked on a fraction of a penny to $2.31 a gallon.

Metals prices were higher. Gold added $2.70 to close at $662.60 an ounce, and silver gained 12 cents at $13.10 an ounce.

Treasuries were falling on the long end. The 10-year note was down 9/32 in price, yielding 4.87%, its highest yield since January, and the 30-year lost 15/32 to yield 5.01%.

Europe's markets were on the rise. London's FTSE was up 0.2% at 6616, and Frankfurt's Xetra DAX was better by 1% at 7735. In Asia, Tokyo's Nikkei tacked on 0.1% at 17,705, but Hong Kong's Hang Seng slipped 0.2% to 20,799.