Stocks Give Some Back

Terror concerns and last week's lackluster reaction to the jobs report hurt stocks.
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Updated from 4:24 p.m. EST

Stocks closed lower, despite some positive developments involving tech bellwethers. The latest bout of terrorism in the Middle East and continued concern about the lackluster reaction to Friday's employment report weighed on sentiment.

The

Dow Jones Industrial Average

closed down 53.26 points, or 0.5%, to 9756.53. The

S&P 500

fell 6.09 points, or 0.6%, to 1047.11, and the

Nasdaq Composite

lost 29.10 points, or 1.5%, to 1941.64.

Volume on the New York Stock Exchange was 1,224,704 shares, while 1,749,326 shares exchanged hands on the Nasdaq.

Equity futures weakened early Monday in the first U.S. trading since suicide bombers killed 17 people and wounded more than 100 in the Saudi capital of Riyadh on Saturday night. Authorities suspect al Qaeda terrorists in the attack, which targeted mostly Arab expatriates living in a housing complex. Crude futures rose 0.3% to $30.95 per barrel. Gold futures were up 0.8% to $387 per ounce.

In addition to the latest terrorist attack, traders were warily contemplating the significance of last Friday. Despite a much-stronger-than-expected October employment report, the Dow closed down 47 points, or 0.5%, to 9810, while the Nasdaq fell 6 points, or 0.3%, to 1971. The S&P lost 5 points, or 0.5%, to 1053.

Richard McCabe, chief market strategist at Merrill Lynch, believes "the market's recent lukewarm response to positive economic and corporate news surprises could be a prelude to an interim correction within its ongoing cyclical bull market."

The 10-year Treasury bond fell 2/32, its yield rising to 4.45%, on light volume. The dollar finished lower vs. the euro and, particularly, the Japanese yen following the weekend re-election of Prime Minister Junichiro Koizumi. Koizumi reassured investors he will maintain the current path of reform, which has attracted international investment to Japan.

IBM

(IBM) - Get Report

kept the Dow from falling deeper into the red, benefiting from an upbeat cover story in this week's

Barron's

. On the other hand,

Hewlett-Packard

(HPQ) - Get Report

shares led Dow laggards after a Lehman Brothers analyst forecasted a drop in sales for some of its products next year. IBM shares rose $1.69, or 1.9%, to $89.95. H-P shares fell 99 cents, or 4.3%, to $22.01.

Semiconductor stocks failed to rally, on the back of several analyst upgrades. The Philadelphia Semiconductor Index fell 3% on the day, but has rallied 82% year to date, suggesting that these were better-late-than-never upgrades.

Intel

(INTC) - Get Report

shares were lower despite being upgraded to overweight from neutral by J.P. Morgan. The company's shares were down 48 cents, or 1.4%, to $33.39. Merrill Lynch also upgraded several names in the semiconductor sector.

Sean Martin, head trader at A. Gary Shilling, believes that today's trading in semiconductors was emblematic of a "market top," and that "many smart people have already bought and sold," the sector following the year's tremendous rally.

In addition, J.P. Morgan downgraded shares of

Adobe Systems

(ADBE) - Get Report

on valuation concerns. The shares dipped $1.65, or 3.7%, to $43.38.

Circuit City

(CC) - Get Report

was upgraded to buy from hold by Jefferies, and established a 52-week price target of $15. Shares of the company moved higher by $1, or 9.4%, to $11.63. Raymond James strategist Jeffrey Saut also gave Circuit City a boost, adding it to the brokerage's focus list.

Shares of

Tiffany

(TIF) - Get Report

failed to rally after WR Hambrecht raised its price target to $52 from $42 and said that third-quarter earnings, due on Nov. 13, may beat Street expectations. The shares fell 1 cent, or 0.02%, to $47.20.

In M&A news,

R.R. Donnelly

(DNY)

agreed to acquire

Moore Wallace

(MWI)

for $2.8 billion in stock, creating the largest commercial printing company in North America. Shares of R.R. Donnelly were down $1.47, or 5.2%, to $26.56, while Moore Wallace shares rallied 90 cents, or 5.9%, to $16.15.

In other news, the World Trade Organization ruled that recently enacted U.S. steel tariffs violate trade rules.

U.S. Steel

(X) - Get Report

stumbled 92 cents, or 3.8%, to 23.48 on the news.

Overseas markets closed lower, with London's FTSE down 0.8% to 4342, and Germany's Xetra DAX down 1% to 3746. In Asia, the Nikkei fell 1.2% to 10,505, and Hong Kong's Hang Seng fell 0.5% to 12,157.

Trading should be quiet tomorrow, with no major releases on the economic or earnings calendar. In addition, the U.S. bond markets will be closed in observance of Veteran's Day. Later in the week, investors will likely focus on Dell earnings on Wednesday and October retail sales reports due out on Thursday.

In addition, market participants are likely to continue to grow nervous over rising interest rates, which could threaten the economic recovery by raising borrowing costs for both consumers and businesses. A. Gary Shilling's Martin believes that the "market has begun to price in higher interest rates, with sector's like homebuilders already coming under pressure."