NEW YORK – Stocks fell Monday after blue-chip giant Citigroup Inc.'s (C) second-quarter profit missed analysts' forecasts, but a drop in oil prices limited the market's decline.
The Dow Jones industrial average (search) slipped 65.84 points, or 0.62 percent, to end at 10,574.99. The Standard & Poor's 500 Index (search) declined 6.79 points, or 0.55 percent, to finish at 1,221.13. The technology-laced Nasdaq Composite Index (search) dropped 11.91 points, or 0.55 percent, to close at 2,144.87.
After a week when the S&P 500 set a four-year high and the Nasdaq reached its highest point for the year, investor enthusiasm waned a bit.
"The markets have had a nice little run, but people were getting too excited. The bullish sentiment numbers are a little overdone," said Rick Campagna, managing director and portfolio manager at Shaker Investments in Cleveland. "Even though fundamentals are good, we'll have to see a pause, you still have issues of high energy prices and the Fed raising rates."
With two weeks of earnings reports ahead, Citigroup's profits punctured some of the optimism that lifted stocks last week. The nation's largest financial institution said challenging market conditions, especially in its fixed-income trading, left it with earnings 5 cents below Wall Street expectations. Citigroup slid 3.1 percent to $45 on the New York Stock Exchange.
"Citigroup got the market off to a bad start," said John C. Forelli, portfolio manager for Independence Investment LLC in Boston. "Investors are preprogrammed for companies to beat (earnings) expectations."
Although earnings are dominating the market this week, traders are also waiting for
Federal Reserve Chairman Alan Greenspan (search) to deliver his much-anticipated semiannual testimony on monetary policy before Congress Wednesday and Thursday.
In a letter to Congress dated July 11 and reported by Dow Jones, the Fed chairman said the economy is dealing "pretty well" with high energy prices. Analysts expect Greenspan to stress that the economy continues to show solid gains and inflation remains subdued. He is not expected to hint that the Fed will pause in hiking interest rates.
"The market is trying to figure out what to focus on," said Forelli. "Some days they focus on the high price of oil and the Fed continuing to raise rates, other days they focus on strong earnings reports and the Fed being close to being done."
The price of oil fell after OPEC lowered its 2005 global demand forecast. The decline put a floor under stocks' fall. A barrel of light, sweet crude oil settled at $57.32, down 77 cents, on the New York Mercantile Exchange (search).
Tobacco stocks fell after the Justice Department asked the Supreme Court to let it seek $280 billion in past profits from cigarette makers, after an appeals court said the government could not seek the money. Altria Group Inc. (MO) dropped fell 74 cents to $65.91; British American Tobacco PLC (BTI) fell 17 cents to $37.58 and Imperial Tobacco Group PLC fell 44 cents to $51.67.
Guidant Corp. (GDT) warned physicians that replacements might be needed for nine pacemaker models made between 1997 and 2000, of which some 28,000 remain implanted in patients worldwide. The announcement was the latest bad news from Guidant, which last month recalled almost 109,000 implanted defibrillators. Its stock fell $2.10 to $67.31.
Mattel Inc. (MAT) fell 1 percent to $19.24 after the largest U.S. toy maker posted a quarterly profit that missed Wall Street expectations. But rival Hasbro Inc. (HAS) rose nearly 3 percent to $22.09 after the company said earnings jumped 57 percent.
Whirlpool Corp. (WPL) offered to buy fellow appliance maker Maytag Corp. (MYG) for $1.37 billion in cash and stock, topping an earlier offer Maytag accepted from an investment group. Whirlpool's offer of $17 per share represents a 21 percent premium over the offer from Triton Acquisition Holding Co. Maytag said its directors would consider Whirlpool's bid, but had not changed their recommendation for the previous deal. Whirlpool rose $3.32 to $73.31. Maytag rose $2.03 to $17.48.
Trading was moderate with 1.21 billion shares changing hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.33 billion stocks were traded on Nasdaq, below the 1.81 billion daily average last year.
Declining stocks outpaced advancing ones by a ratio of about 5 to 3 on the NYSE, and by about 3 to 2 on Nasdaq.
The Russell 2000 index of smaller companies fell 5.18, or 0.78 percent, to 658.56.
Overseas, Japan's Nikkei stock average fell 0.05 percent. Britain's FTSE 100 was down 0.32 percent, Germany's DAX index was up 0.14 percent, and France's CAC-40 was down 0.24 percent.
Reuters and the Associated Press contributed to this report.