Stocks Fall for Third Day in a Row

The major averages fail to overcome a string of concerns.
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Updated from 4:10 p.m. EST

Stocks closed lower Tuesday for the third day in a row, failing to overcome growing nervousness over the specter of rising interest rates and the impact of mutual fund withdrawals. However, the retail sector bucked the downtrend and rallied behind positive earnings and analyst upgrades.

The

Dow Jones Industrial Average

closed down 18.74 points, or 0.2%, to 9737.79, while the

Nasdaq

fell 10.89 points, or 0.6%, to 1930.75. The

S&P 500

fell fractionally to 1046.57.

Marsh & McLennan

(MMC) - Get Report

announced that $14 billion was withdrawn from its

Putnam Investments

unit for the week ended Friday; many traders suspect Putnam's selling to meet such heavy levels of redemptions is contributing to the broader market's weakness. Marsh & McLennan shares dropped 77 cents, or 1.7%, to $44.47.

Another issue of concern for traders is the timing of a Fed tightening given the recent signs of economic strength.

David Bowers, Merrill Lynch's chief global investment strategist, wrote that while "the global recovery that began in Asia appears to be broadening to include the U.S. economy ... the bad news is that there are increasing worries that we could be on the brink of a new central bank tightening cycle."

However, Bowers believes it is still too early to price in Fed tightening. He believes that with inflation still low, "our U.S. economics team still expects no change in Fed Funds at all in 2004."

The Treasury market was closed for the Veterans Day holiday, keeping volumes light in the equity markets. Volume on the New York Stock Exchange was 1,161,645 shares, while 1,635,579 shares exchanged hands on the Nasdaq.

The dollar was down vs. the euro but up marginally vs. the Japanese yen. Currency traders say they suspect Japanese officials intervened in the markets to stem the yen's recent strength as part of their efforts to keep Japanese exports competitive.

There also are some lingering concerns about rising trade tension between the U.S. and major trading partners, after Washington's initial rejection Monday of a World Trade Organization final ruling that U.S steel tariffs violate global trade rules.

U.S. Steel

(X) - Get Report

shares gained 22 cents, or 0.9%, to $23.70, after stumbling nearly 4% on Monday following the ruling.

Oracle

(ORCL) - Get Report

shares fell 3 cents, or 0.2%, to $12.54 on reports it may abandon its hostile bid for

PeopleSoft

(PSFT)

, which was down 43 cents, or 2%, to $21.62. PeopleSoft has been offering customer refunds should Oracle's bid fail, and Oracle says in a filing in Delaware Chancery Court that it might be forced to drop its bid if a judge doesn't end the program. A

Prudential

analyst believes that shareholders would benefit if the bid is dropped, and Oracle used the funds for other acquisitions.

EchoStar

(DISH) - Get Report

turned a profit in the third quarter, earning 7 cents a share after losing 35 cents a year ago. Analysts, however, had expected the company to earn 16 cents. EchoStar shares were down $4.75, or 12.9%, to $32.05.

Positive developments from the retail sector, ahead of the important holiday shopping season, failed to lift the broader markets, but lifted select names.

Merrill Lynch upgraded several stocks in the retail sector, including

Target

(TGT) - Get Report

and

Gap

(GPS) - Get Report

. Target was up 37 cents, or 1%, to $39.42, while Gap shares rose 30 cents, or 1.5%, to $21.03.

J.C. Penney's

(JCP) - Get Report

profit fell to 27 cents per share in the third quarter, from 30 cents last year. This was marginally ahead of Street expectations. The retailer's shares rose 37 cents, or 1.6%, to $23.65.

May Department Stores

(MAY)

, which operates the Lord & Taylor and Filene's store chains, earned 15 cents per share in the third quarter, improving from 5 cents a year ago. This was ahead of analyst expectations for an 11-cent gain. May shares rose 18 cents, or 0.6%, to $29.58.

In other earnings news,

Tenet Healthcare

(THC) - Get Report

, the subject of a federal investigation, lost 66 cents per share in the third quarter after posting a profit of 66 cents in the same period last year. Substantial legal expenses continue to put a drag on profits. Tenet shares were down 22 cents, or 1.7%, to $13.03.

Exxon Mobil

(XOM) - Get Report

shares rose 29 cents, or 0.8%, to $36.05, following bullish comments from

Bank of America

and a 0.1% rise in crude oil futures to $31.19 per barrel. In addition,

ChevronTexaco

(CVX) - Get Report

rose 34 cents, or 0.5%, to $74.15.

Overseas markets finished mostly lower on Tuesday, with London's FTSE fractionally higher at 4345 and Germany's Xetra DAX rising 0.4% to 3730; the DAX struggled despite a report German investor confidence rose to a 16-month high. In Asia, the Nikkei finished down 2.8% to 10,207, and Hong Kong's Hang Seng fell 1.3% to 12,004.

Looking ahead, retailers will likely be the focus for the balance of the week. On Thursday,

Wal-Mart

(WMT) - Get Report

, Target and

Kohl's

(KSS) - Get Report

will all release third-quarter earnings. On Friday, October retail sales will be released and is expected to fall 0.2% over the month.

Tomorrow,

Federated Department Stores

(FD)

, which operates Bloomingdale's and Macy's, will report third-quarter earnings before the open. Analysts expect earnings per share of 34 cents, down slightly from 38 cents last year. Today, Smith Barney upgraded the stock to buy from hold, pushing the shares up $1.62, or 3.4%, to $50.17, a new 52-week high.