NEW YORK – Stocks ended mixed Monday, with blue chips falling amid brokerage downgrades of three blue-chip stocks and a rise in crude oil futures almost to the $43 level.
Tthe Dow Jones industrial average (search) fell 45.15, or 0.43 percent, to 10,547.06. Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index (search) was down 0.92, or 0.08 percent, at 1,190.25, and the Nasdaq composite index (search) gained 3.29, or 0.15 percent, to 2,151.25.
"The rally ran into some headwinds Thursday and Friday of last week, and the news on oil prices overnight wasn't great, but this market has shown some incredible resilience," said Ken Tower, chief market strategist at Schwab's CyberTrader. "This is a very strong rally, and it should continue at least through the end of the month, with a few bumps here and there."
Brokerages lowered their ratings on three Dow components — Pfizer Inc. (PFE), Alcoa Inc. (AA) and Verizon Communications Inc. (VZ) — illustrating the difficulties many companies may have in posting strong profits in 2005.
The rise in oil futures — a barrel of light crude was quoted at $42.98, up 44 cents, on the New York Mercantile Exchange (search) — was prompted by a terrorist attack in Saudi Arabia and protests in Nigeria that raised concerns about the safety of the world's oil supply. The gains reversed a four-day downward trend that allowed Wall Street to look past a disappointing job creation report on Friday.
While oil prices rose, the dollar also saw pressure due to news reports that said the Bush administration was considering replacing Treasury Secretary John Snow (search). Snow was not overly concerned about the weak dollar, and his replacement is considered likely to follow the same policy.
A lower dollar helps U.S. products overseas, but the greenback's tumble has some on Wall Street worried that foreign investors will be deterred from investing in U.S. assets.
While some analysts felt investor optimism would be enough to overcome the lingering questions about the economy and oil prices, others felt the problems could become too great for investors to ignore.
"We get that tightness in the oil markets and the dollar problems, and investors get very jumpy," said Hugh Johnson, chief investment officer at First Albany Corp. "It's not a knockout punch or a haymaker or whatever you want to call it, but it's very damaging to optimism, and that could keep this December rally from unfolding."
Better economic news, combined with a resumption of falling oil prices from last week, could spur more buying, analysts said.
Shares of Pfizer 68 cents to $27.21 after the company was downgraded by Merrill Lynch to "neutral" from "buy" due to "modest upside potential." The brokerage said concerns over government regulations, including the Food and Drug Administration's (search) approval process, along with court battles over Pfizer's Lipitor patent prompted the downgrade.
Wyeth (WYE) also fell after a Merrill Lynch downgrade, and Britain's Medicines and Healthcare Products Regulatory Agency highlighted potential problems with the drugmaker's antidepressant drug, Effexor, use of which will be restricted in the future.
Shares of Pfizer, which sells the antidepressant drug Zoloft, fell 2.5 percent to $27.18. Eli Lilly (LLY) slipped 0.55 percent to $54.20.
Goldman Sachs said Alcoa will face higher material costs and a complex labor situation in 2005, prompting a downgrade to "in-line" from "outperform." Alcoa was down 44 cents at $32.42.
Verizon Communications Inc. slipped 8 cents to $41.94 after it was cut to "hold" from "buy" at Tradition Asiel Securities. The brokerage said the telecommunication giant's stock was approaching full valuation, and did not appear to be heading for another major rise.
The jump in crude prices weighed on economically sensitive stocks such as 3M Co. (MMM), which was down nearly 1 percent at $80.34 on the New York Stock Exchange.
Falling third-quarter sales at Circuit City Stores Inc. (CC) gave investors more reason for concern over retail stocks and a slow holiday shopping season. The electronics retailer said sales at stores open at least a year dropped 4.3 percent from a year ago due to a different music and software promotional scheme, weaker new releases during the quarter and changes in the way the company handles satellite service and mobile phone subscriptions. Circuit City fell 9.7 percent to $14.63.
Kimberly-Clark Corp. (KMB) gained 72 cents at $64.70 after it hiked its dividend 12.5 percent to 45 cents per share and said it plans to buy back up to $1 billion worth of its stock in 2005.
Bear Stearns raised its share price target on Apple Computer Inc. (AAPL) to $72 from $60, citing upside potential from the expected introduction of a flash memory iPod digital music player.
The Russell 2000 index of smaller companies was down 3.18, or 0.5 percent, at 639.03.
Overseas, Japan's Nikkei stock average fell 0.84 percent. In Europe, Britain's FTSE 100 closed down 0.53 percent, France's CAC-40 dropped 0.43 percent for the session, and Germany's DAX index lost 0.36 percent.
Reuters and the Associated Press contributed to this report.