Stocks fall on Citigroup earnings
Wall Street’s rally skidded to a halt Monday after weaker-than-expected earnings from Citigroup Inc. raised questions about other companies’ second-quarter results.
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 its earnings 5 cents below Wall Street expectations.
“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.”
The price of oil fell $1 a barrel in morning trading after OPEC lowered its 2005 global demand forecast. A barrel of light, sweet crude oil settled at $57.32, down 77 cents, on the New York Mercantile Exchange.
The Dow Jones industrial average fell 65.84, or 0.62 percent, to 10,574.99.
Broader stock indicators also dropped. The Standard & Poor’s 500 index fell 6.79, or 0.55 percent, to 1,221.13, and the Nasdaq composite index fell 11.91, or 0.6 percent, to 2,144.87.
“We’re seeing some normal profit taking that comes after the nice run we’ve had since May,” said Janet Engels, senior vice president, director of the Private Client research group at RBC Dain Rauscher.
Although earnings are dominating the market this week, traders are also waiting for Federal Reserve Chairman Alan Greenspan 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.”
Bonds dropped sharply on news of Greenspan’s letter, with the yield on the 10-year Treasury note rising to 4.22 percent from 4.17 percent late Friday. The U.S. dollar was down against the euro. Gold prices were flat.
Declining issues led advancers roughly 3 to 2 on the New York Stock Exchange, where preliminary consolidated volume was 1.59 billion shares, down from 1.76 billion Friday.
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.