Caution precedes earnings reports
NEW YORK – Wall Street finished a quiet session mostly lower Monday, as investors cashed in some gains from last week’s rally and readied for quarterly corporate earnings reports.
The Treasury bond market was closed for the Columbus Day holiday, and there was no major economic news to guide investors, so Wall Street remained cautious ahead of the flood of third-quarter results. Aluminum producer Alcoa Inc., one of the 30 Dow Jones industrial average components, kicks off the earnings season today.
Earnings are expected to reflect the difficulty some companies have faced – particularly in the financial and housing sectors – following upheaval in the credit markets amid overly leveraged debt and defaults in subprime mortgages. The reports will also give insight into the fourth quarter, which market participants predict will bring more robust growth.
“There’s room for a rally if third-quarter earnings come in stronger than expected, but they do want to see that the fourth quarter is going to be strong as well,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.
Trucking company Ryder System Inc. contributed to Wall Street’s wariness Monday when it lowered its third-quarter and full-year forecasts on weakness in its fleet management business.
The Dow fell 22.28, or 0.16 percent, to 14,043.73.
Broader stock indexes were mixed. The Standard & Poor’s 500 index fell 5.01, or 0.32 percent, to 1,552.58, while the Nasdaq composite index rose 7.05, or 0.25 percent, to 2,787.37. The Russell 2000 index of smaller companies fell 4.74, or 0.56 percent, to 840.14.
Trading volumes were low, with many investors on the sidelines for the holiday. Declining issues outnumbered advancers by nearly 2-to-1 on the New York Stock Exchange, where consolidated volume came to 2 billion shares, down from 2.93 billion shares Friday.
Trading also was light because the market is waiting for today’s release of minutes from the Federal Reserve’s Sept. 18 meeting, when policymakers lowered interest rates by a half-point. Wall Street hopes the minutes reveal hints that more rate cuts are in store, which could further loosen the credit markets and fuel spending.
The tech-heavy Nasdaq got a boost from Google Inc., which surpassed $600 for the first time and extended a monthlong rally after upbeat projections about third-quarter earnings. The company’s initial public offering price was $85 in August 2004, and shares on Monday rose $15.57, or 2.6 percent, to $609.62.