NEW YORK – Stocks fell Tuesday, touching new lows for the year, as a rebound in oil prices, negative economic news from Asia and a collapse in heavy equipment makers such as Caterpillar Inc. (CAT) offset rising shares of American International Group (AIG).
The Dow Jones industrial average (search) dropped 79.95 points, or 0.76 percent, to 10,405.70. The Standard & Poor's 500 Index (search) dropped 8.92 points, or 0.76 percent, to 1,165.36. The Nasdaq Composite Index (search) dropped 18.64 points, or 0.94 percent, to 1,973.88.
The Nasdaq notched a fresh low for 2005, closing at its lowest since October 2004. The Standard & Poor's 500 hit a fresh low for the year before recouping some losses, while the Dow ended at its lowest in about 2 months.
"We've been in kind of a downward trend overall this year, and there's nothing real positive that I can see to shake us out of it," said Brian Bruce, director of global investments at PanAgora Asset Management Inc. "It's going to take a number of positive things, from both an economic and individual company basis, for the market to get some momentum and enthusiasm going."
Caterpillar (CAT) tumbled 4.7 percent, down $4.42 to $89.80, after Morgan Stanley issued a report saying such stocks may be near their peak. Manufacturer Ingersoll-Rand Co Ltd. fell nearly 2 percent, or $1.79 to $78.98.
Another negative for stocks was crude oil reversing course and bouncing into positive territory. Crude for May delivery settled up 18 cents at $54.23 a barrel on the New York Mercantile Exchange (search), reversing an earlier fall. High oil prices hurt corporate profits and consumer spending and generally weigh on equities.
Also dragging on stock markets was a report that U.S. consumer confidence fell slightly in March, as higher gasoline prices dampened the mood of car-reliant Americans.
In addition, investors were cautious ahead of Friday's keenly anticipated jobs report for March.
"There are continuing concerns about the possibility of higher inflation down the road, while investors are clearly focused on the data on Friday on payroll," said Ned Riley, chief investment officer of Riley Asset Management.
He added that there was "still some disappointment that we haven't seen a greater price erosion" in oil.
"Today's weakness prevails in the steels, metals and capital goods manufacturers, which have been the darlings of the market for an extended period of time," said Riley.
"The scenario, if carried out to its most negative extent, would be that inflation continues to be the target of the Federal Reserve, and the Fed starts to accelerate the increase in interest rates. Then, the choking off of this fairly buoyant recovery would have its most severe impact on cyclicals stocks."
Business systems company NCR Corp. (NCR) slid 17.2 percent, or $6.50, to $31.40 after Hewlett-Packard Co. (HPQ) named NCR Chief Executive Mark Hurd to lead the No. 2 computer maker and replace CEO Carly Fiorina, who was ousted in February. Hewlett-Packard rose 10.1 percent to $21.78.
Meanwhile, shares of Morgan Stanley (MDW) fell 3.4 percent, or $1.87, to $53.61. Eight of its former partners who earlier this month quietly asked the board to replace Chairman and Chief Executive Philip Purcell went public, saying management changes announced by the firm failed to address the problems they raised.
Drug stocks were also weak. Pfizer (PFE), fell 2.3 percent, or 59 cents, to $25.64. Austrian authorities have invalidated a patent covering Pfizer's cholesterol-lowering drug, Lipitor, according to a notice on the Bombay Stock Exchange. The decision applied only in Austria.
Eli Lilly and Co. (LLY) was down 2 percent at $51.63 after Mylan Laboratories Inc. said it won tentative approval to market a generic form of Eli Lilly's best-selling schizophrenia drug, Zyprexa.
Wall Street watched closely as the latest move in the MCI-Verizon-Qwest merger battle unfolded. MCI Inc. (MCIP) rose 84 cents to $23.78 after it accepted Verizon Communications Inc.'s (VZ) improved $7.6 billion offer, valued at $23.50 per share, including $8.75 in cash per share.
Verizon's offer, which was increased by nearly $1 billion, was still lower than Qwest Communications International Inc.'s (Q) $25.60 per share bid, but analysts said Verizon was a better match for the former WorldCom Inc. Verizon gained 14 cents to $34.86, while Qwest added 4 cents to $3.79.
Insurer American International Group Inc. (AIG) said Maurice "Hank" Greenberg would not stay on as non-executive chairman. Two weeks after his ouster as chief executive officer, the company said Greenberg will be replaced as chairman by Frank G. Zarb on an interim basis. AIG rose $1.18 to $58.20.
Shares of HCA Inc. (HCA), the No. 1 U.S. hospital operator, rose 8 percent to $52.86 a day after it said it expects first-quarter net income to exceed analysts' estimates.
Delta Air Lines Inc. (DAL) was up 7 cents at $4.05 after the struggling air carrier said it would save $240 million over five years by outsourcing its heavy maintenance operations, resulting in the loss of 1,600 to 2,000 jobs.
Morgan Stanley (MWD) edged 2 cents higher to $55.50 after a management shakeup in response to the company's lagging stock price. The company said President Stephan Newhouse would be replaced by two co-presidents, company executives Stephen Crawford and Zoe Cruz. Crawford and Cruz would have responsibility for institutional securities as well as individual investor and investment management groups.
Trading was heavy, with 1.76 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.83 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.
Decliners outnumbered advancers on the New York Stock Exchange by about 2 to 1 and by about 3 to 2 on Nasdaq.
The Russell 2000 index of smaller companies was down 10.49, or 1.71 percent, at 604.63.
Overseas, Japan's Nikkei stock average tumbled 1.63 percent. In Europe, Britain's FTSE 100 closed down 0.07 percent, France's CAC-40 climbed 0.08 percent for the session, and Germany's DAX index rose 0.19 percent.
Reuters and the Associated Press contributed to this report.