Stocks Limp Out of Second Quarter
Updated from 4:14 p.m. EDT
Blue chips closed the final session of the second quarter just barely to the upside, while tech shares continued the weakness that ended last week.
The
Dow Jones Industrial Average
edged ahead by 3.5 points at 11,350.01, and the
S&P 500
added 1.62 points, or 0.1%, to 1280. The
Nasdaq
lost 22.65 points, or 1%, to 2292.98.
For the Dow, it wrapped up the quarter in negative territory, its third consecutive quarterly decline. That hasn't happened in 30 years.
Oil was in focus again at the start of the new, holiday-shortened week. Crude for August delivery closed down 21 cents at $140, after earlier passing the $143 mark to reach a new all-time high. Investors remain nervous about potential disruption of the Iranian oil supply as tensions mount over its nuclear program. Gasoline prices rose to $4.086 a gallon from $4.079. Gold ended the day down $3 at $928.30.
The early advance in crude had energy stocks trading higher, though the strength in the group was mitigated somewhat as oil pulled back.
Devon
(DVN) - Get Devon Energy Corporation Report
added 4.6% to $120.16, and
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Peabody
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climbed 4.8% to $88.05.
Elsewhere in commodities, the Department of Agriculture said that this year's corn crop will be 6.3 million acres leaner than last year's thanks in part to flooding in the Midwest. Corn futures reached $7.57 a bushel.
Utilities also logged a slight rally. The
Utilities Select SPDR
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, which tracks the sector, was up 2.4% at $40.70.
Hand-wringing over the financial sector continued as Wall Street trading got underway. Ladenburg Thalmann analyst Dick Bove said
Merrill Lynch
( MER) will be forced to raise capital for the third quarter and may have to sell a portion of its stake in
Bloomberg
. Bove slashed his 2008 earnings estimate for the brokerage to a loss of $1.64 a share vs. his previous forecast of $1.37. He also cut his profit estimates for
Morgan Stanley
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. Merrill slumped 3% to $31.71, and Morgan Stanley lost 1.7% to $36.07.
Similarly, a Robert W. Baird analyst cut his earnings forecast and price targets for
Bank of America
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and
Wachovia
. Bank of America was off 2.9% at $23.87, while Wachovia dropped 4.3% to $15.53.
After Friday's close,
The Wall Street Journal
reported that
MBIA
is selling $500 million in municipal bonds to make payments following a credit-rating downgrade of the bond insurer by Moody's.
MBIA denied the report and also said today that it will collateralize $3.9 billion of its guaranteed investment contracts and terminate another $3.6 billion in GICs. Chief Financial Officer C. Edward Chaplin said that the company does not face a "tenuous situation." Shares ended the day up 5.3% at $4.39.
Most of the trading during the session was about end-of-quarter buying and selling, said Randy Diamond, vice president of equity research sales and trading at Miller Tabak, in an email. He said this trading is significant as it pertains to the market's "haves" -- energy -- and "have nots" -- financials.
Traders were also responding to several moves on the M&A front. French phone company
France Telecom
(FTE)
announced it has dropped its $42 billion bid for Sweden's TeliaSonera, saying the acquisition was not crucial to its strategy. Shares climbed 8.3% to finish at $29.63.
Sector counterparts
Sprint
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and
Vodafone
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were among the day's winners, each up more than 5% at $9.50 and $29.46, respectively.
Meanwhile, mining concern
ArcelorMittal
(MT) - Get ArcelorMittal SA Report
said it is taking a 60% stake in new steel presence
Dubai Steel Trading
. The
Financial Times
reported that Mittal is considering entering an acquisition fight over
Rio Tinto
( RTP), which faces a hostile takeout bid from
BHP Billiton
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. Rio Tinto finished the day up 8.2% at $495, and BHP Billiton tacked on 2.8% at $85.19.
Del Monte Foods
( DLM) said Sunday it would sell its seafood business, which includes StarKist canned tuna, to South Korean food company Dongwon Enterprise for $363 million. Shares tumbled 6.6% to $7.10.
As for earnings, tax-services company
H&R Block
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said it swung to a fourth-quarter profit from a loss a year ago, beating analysts' expectations. The stock gained 2.8% to $21.40.
Investors were putting money to work outside the financial space, giving the telecom and health care sector a chance to shine. Blue-chips
Verizon
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and
Merck
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led the Dow, as well as their respective sectors, into the green zone. Verizon ticked up 3.3% to $35.40, and Merck added 1.9% to $37.69.
Technology stocks had some trouble, weighing on the Nasdaq. A French court ordered online auction block
eBay
to pay $63 million to luxury goods purveyor
Luis Vuitton Moet Hennessy
and sister company
Christian Dior
over eBay's sale of knockoff accessories and perfumes. eBay lost 1% to $27.33.
Elsewhere in the Internet area,
Yahoo!
(YHOO)
said in a presentation filed with the
Securities and Exchange Commission
that
Microsoft
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was inconsistent in its buyout overtures, and may never have been committed to a takeover. Yahoo! shares fell 3% to 20.66.
On the data side, the June Chicago purchasing managers index offered a glimmer of hope, rising to 49.6 from 49.1 in May, beating the consensus estimate of 48.
"I wouldn't necessarily call that a tier-1 economic data point," said Stephen Sachs, director of trading at Rydex Investments, of the Chicago PMI. As the market retests the March lows, traders are going to be paying special attention to any data release, said Sachs. "Anything better than expectations at this point is going to be a positive."
Sachs said that bearish news, such as rising inflation in the Eurozone, concerns about oil and warnings from the Bank for International Settlements that the global economy may be in for a downturn, have already been taken into account. He also said that end-of-quarter buying may account for the slight rise in stock prices.
Treasury prices were nearly unchanged. The 10-year note held steady in price, yielding 3.97%, and the 30-year gained 1/32 to yield 4.52%. The dollar was stronger against the euro, the yen and the pound.
Overseas, the action was mixed. Japan's Nikkei and Frankfurt's Dax were both lower, while the Hong Kong Hang Seng and London's FTSE were gaining ground.
