Stocks Fall as Blue Chips Struggle
Stocks slumped Monday after a three-day weekend, as investors winced at the struggles of blue-chip energy and industrial companies.
At 11: 17 a.m., the Dow Jones Industrial Average was down 112.4 points, or 1.4%, at 7971. Some investors took money off the table following Thursday's 246-point surge, which capped a holiday-shortened week.
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The Dow was weighed down by its component Boeing, which tumbled after analysts at Cowen & Co. downgraded the jet maker to an "underperform" rating from "neutral," citing weakness in airlines' ability to use credit to buy new planes, among other factors. Chevron also was a big decliner among Dow stocks following its announcement after Thursday's closing bell that it expects first-quarter 2009 earnings to be "sharply lower" than in the fourth quarter of 2008.
General Motors shares fell amid fears that the auto maker will have to file for bankruptcy protection. GM shares were recently down 15.7%.
Other market yardsticks also traded lower. The Nasdaq Composite Index was down 0.8%, while the S&P 500 was off 1.1%. All its sectors traded lower, except health care, a traditional safe haven that managed a slim gain. Energy and industrials -- two categories particularly sensitive to the potential for economic recovery -- led the way lower on Monday.
The unfolding earnings season continues to be a major focus for many investors, with a spate of results due throughout the week. In particular, reports are due over the next few days from a series of financial giants, including Goldman Sachs Group, J.P. Morgan Chase, and Citigroup.
Financial companies had been among the hardest hit by the economic downturn and credit crisis, but they also helped lead a rally over the past five weeks. As with other sectors, investors will pay close attention not only to Wall Street giants' per-share earnings, but also their outlooks for the rest of the year.
"If Wall Street sees a bottom in the economy, then the banking crisis ends," said strategist Jim Paulsen, of Wells Capital Management in Minneapolis. "If the banks can actually forecast things, rather than being in this unprecedented situation when no one can tell what's coming next, they can start to lend again," generating greater profits for themselves and growth in the overall economy.
On Thursday, a surprise announcement by Wells Fargo that it will report a record profit for the first quarter helped send the market sharply higher ahead of the three-day holiday weekend.
Meanwhile, the U.S. Treasury has directed GM to lay the groundwork for a bankruptcy filing by a June 1 deadline, the New York Times reported. The preparations are reportedly aimed at assuring a bankruptcy filing is ready if the company isn't able to reach agreement with bondholders to exchange around $28 billion in debt into equity and to get concessions from the United Automobile Workers Union. GM shares tumbled 16%.
Express Scripts plans to purchase WellPoint's pharmacy benefits management subsidiaries for $4.68 billion, the companies announced Monday. Express Scripts, headquartered in St. Louis, is buying the business with a mixture of cash and up to $1.4 billion in stock, The Wall Street Journal reported.
Oil futures fell Monday, losing $1.56 a barrel to $50.68 in recent trade. The U.S. dollar rose 0.3% versus the Japanese yen to 100.53 yen.
European markets were closed for the Easter Monday holiday. In Asia, shares ended mostly higher, although Japan's Nikkei average fell 0.4% in a choppy trading session.
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