Blue-chip downgrades pressure stocks
Oil supply concerns and broker downgrades of blue-chip companies left stocks mixed Monday, raising doubts that Wall Street’s yearend rally would continue.
Brokerages lowered their ratings on three Dow components — Pfizer Inc., Alcoa Inc. and Verizon Communications Inc. — 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 — 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.
“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.”
The Dow Jones industrial average fell 45.15, or 0.43 percent, to 10,547.06.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index was down 0.92, or 0.08 percent, at 1,190.25, and the Nasdaq composite index gained 3.29, or 0.15 percent, to 2,151.25.
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. Snow was not overly concerned about the weak dollar, and his replacement is considered likely to follow the same policy.
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.
Declining issues outnumbered advancers by nearly 4 to 3 the New York Stock Exchange, where preliminary consolidated volume came to 1.75 billion shares, compared with 2.01 billion on Friday.
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.