Energy Stocks Drag on Market

PETER A. MCKAY DONNA KARDOS YESALAVICH

Flagging consumer confidence weighed on both the stock market and the price of crude oil on Tuesday.

The Dow Jones Industrial Average recently was recently down about 44 points. Exxon Mobil and Chevron were drags on the benchmark, falling more than 1% each.

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Crude's losses piled up and stocks slid into the red after the Conference Board said that its index of consumer confidence fell to 46.6 in July from 49.3 in June, a bigger decline than analysts were expecting.

Art Hogan, chief market analyst at Jefferies & Co., said that consumers' outlook and their actual behavior will be more important in subsequent months as back-to-school and holiday-related shopping gets under way. But for now, the July confidence reading was enough to attract some sellers at a time when the market had otherwise been on a sharp trend higher.

"The numbers we saw today aren't necessarily a deal breaker, but on the other hand, people don't need a big excuse to take money off the table at this point," said Mr. Hogan. "We haven't really had a lot of catalysts to do that."

The Dow has risen in 10 of the last 11 full trading sessions and is up nearly 8% for the month to date. That left many traders on guard against a short-term pullback coming into Tuesday's session.

BP, which is not a Dow stock, saw its shares slide about 2.5% after posting a 53% drop in profit. Valero Energy was off 2.3% after swinging to a second-quarter loss as a strategy to process heavier grades of crude oil backfired amid falling sales volume and prices. In addition, diesel and jet fuel profit margins were weak.

Oil futures were down $1.14 to $67.24 a barrel in New York, on track to snap a three-day winning streak in which the commodity has leapt by nearly 5%.

The Nasdaq Composite Index was off 0.1%. The S&P 500 fell 0.6%, led by declines of more than 2% each in its energy and utilities sectors. The health-care sector managed to eke out a 0.5% gain thanks to favorable earnings news.

Amgen shares rose 3% after raising its earnings guidance and partnering with GlaxoSmithKline to sell a new bone drug. Coventry Health Care rose more than 11% after lifting its earnings guidance.

Also Tuesday, the S&P/Case-Shiller home-price index showed 16 of 20 major metropolitan areas posted price declines of more than 10% from a year earlier, though prices rose on a month-to-month basis for the first time in nearly three years. Housing stocks were generally weaker after the report.

Stephen Wood, chief market strategist at Russell Investments, said investors are continuing to be extremely cautious. "My expectation is their confidence is going to be driven far more by unemployment data, housing data and household wealth. A big driver is their perceptions of their own economic well-being."

He added that while profits had come in better than expectations in the first quarter largely thanks to cost cuts, investors are now looking to see that companies are actually driving revenue. "The firms moving forward that can drive revenue in a measurable way" are those whose stocks will rise the most, he said.

Among stocks to watch on Tuesday, SPSS shares surged 41% after International Business Machines said it would pay $1.2 billion, or $50 a share, to buy the Chicago business analytics firm. IBM, a Dow component, slid 0.7%.

Interpublic Group plunged 13% after reporting a 71% drop in second-quarter net income due to declining margins and revenue. The advertising company's profit and revenue were both worse than analysts expected.

U.S. Steel fell 2% after it said that it swung to a quarterly loss as orders and capacity use remained low. The company said it expects more red ink in the current quarter.

The dollar declined against the yen and rose against the euro. Treasury prices were mixed, with longer maturities gaining.