Stocks slip as investors tread carefully

Wall Street began 2005 with a loss Monday as investors shored up portfolios and abandoned risky positions taken during the post-election rally. The drop came despite falling oil prices and a better-than-expected sales forecast from Wal-Mart Stores Inc.

While Wall Street has usually opened the new year with a buying spree, investors were picky, favoring large-caps with solid balance sheets over small-caps and more speculative bets. Analysts said Wall Street’s customary new year buying could have been accelerated into 2004 by the market’s rally in November and December.

“Usually, you see a lot more speculative trading to start the new year, with all the new money coming in,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “But here, you’re seeing a big move to quality, large-cap stocks. I think there’s been a realization that these stocks are attractively priced.”

As investors sold off stocks, they overlooked a sharp drop in crude futures, triggered by mild weather in the Northeast and reports of increased crude production. The drop could be good news for consumer spending, which accounts for two-thirds of the nation’s economy. A barrel of light crude was quoted at $42.13, down $1.32, on the New York Mercantile Exchange.

The Dow Jones industrial average fell 53.58, or 0.5 percent, to 10,729.43.

Broader stock indicators fell sharply. The Standard & Poor’s 500 index was down 9.84, or 0.81 percent, at 1,202.08, and the Nasdaq composite index tumbled 23.29, or 1.07 percent, to 2,152.15.

A mix of economic news further sapped any momentum stocks may have enjoyed. Construction spending took an unexpected hit in November, falling 0.4 percent for the month, the Commerce Department said. Investors had been expecting a rise of 0.4 percent after October’s 0.3 percent gain.

Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.51 billion shares, compared to 787.81 million on Friday.

The Russell 2000 index of smaller companies was down 11.13, or 1.71 percent, at 640.44.

Overseas, markets in Japan and Britain were closed for the New Year’s holiday. Elsewhere, Germany’s DAX index closed up 0.83 percent, and France’s CAC-40 climbed 0.9 percent.